-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q2ssmmt3/DXyBUxUe6y3a4dog4nYZZVD1HOGFemTkCIu9TdUfXJugh1h0pVA7Akj mwfn1bVpCZyDMbHca3tdyQ== 0000912057-00-025649.txt : 20000522 0000912057-00-025649.hdr.sgml : 20000522 ACCESSION NUMBER: 0000912057-00-025649 CONFORMED SUBMISSION TYPE: 20-F PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000519 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERTAPE POLYMER GROUP INC CENTRAL INDEX KEY: 0000880224 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 000000000 STATE OF INCORPORATION: A8 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 20-F SEC ACT: SEC FILE NUMBER: 001-10928 FILM NUMBER: 640298 BUSINESS ADDRESS: STREET 1: 110E MONTEE DE LIESSE STREET 2: ST LAURENT CITY: QUEBEC H4T 1N4 CANAD STATE: A8 BUSINESS PHONE: 5147310731 MAIL ADDRESS: STREET 1: 110 E MONTEE LIESSE CITY: ST LAURENT STATE: A8 ZIP: 00000 20-F 1 FORM 20-F UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year ended December 31, 1999 Commission file number: 1-10928 INTERTAPE POLYMER GROUP INC. (Exact name of Registrant as specified in its charter) Canada (Jurisdiction of incorporation or organization) 110E Montee de Liesse, St. Laurent, Quebec H4T 1N4 Canada (Address of principal executive offices) Securities registered pursuant to Section 12(b) of the Act: Title of each class: Name of each exchange on which registered: Common Shares, without nominal or New York Stock Exchange par value The Toronto Stock Exchange Securities registered or to be registered pursuant to Section 12(g) of the Act: -NONE- Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: -NONE- The number of outstanding shares of each of the issuer's classes of capital stock as of December 31, 1999 is: 28,296,392 Common Shares -0- Preferred Shares Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ___x___ No _____ Indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ___x___ Item 18 _____ TABLE OF CONTENTS
Item Caption Page ---- ------- ---- CAUTIONARY STATEMENTS AND RISK FACTORS..................................................1 PART I.......................................................................................2 ITEM 1. DESCRIPTION OF BUSINESS.......................................................2 ITEM 2. DESCRIPTION OF PROPERTY......................................................17 ITEM 3. LEGAL PROCEEDINGS............................................................18 ITEM 4. CONTROL OF REGISTRANT........................................................18 ITEM 5. NATURE OF TRADING MARKET.....................................................19 ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS...........20 ITEM 7. TAXATION.....................................................................21 ITEM 8. SELECTED FINANCIAL DATA......................................................22 ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................................................24 ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...................25 ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT.........................................28 ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS.......................................32 ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES...............34 ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS...............................36 PART II.....................................................................................38 PART III....................................................................................38 ITEM 15. DEFAULTS FROM SENIOR SECURITIES.............................................38 ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES.....38 PART IV.....................................................................................39 ITEM 17. FINANCIAL STATEMENTS........................................................39 ITEM 18. FINANCIAL STATEMENTS........................................................39 ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS...........................................39 SIGNATURES.............................................................................41 EXHIBIT INDEX..........................................................................42
i CAUTIONARY STATEMENTS AND RISK FACTORS This Annual Report contains certain "forward-looking statements" within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") concerning, among other things, discussions of the business strategy of Intertape Polymer Group Inc. (the "Company" or "Intertape Polymer Group") and expectations concerning the Company's future operations, liquidity and capital resources. When used in this Annual Report, the words "anticipate", "believe", "estimate", "expect" and similar expressions are generally intended to identify forward-looking statements. Such forward-looking statements, including statements regarding intent, belief or current expectations of the Company or its management, are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of various factors, including those factors set forth below and other factors discussed elsewhere in this Annual Report. In addition to the other information contained in this Annual Report, readers should carefully consider the cautionary statements and risk factors contained in Item 9A below. IMPLEMENTATION OF BUSINESS STRATEGY The Company's business strategy includes, among other things, increasing manufacturing capacity, developing new products, improving distribution efficiencies, and expanding into new geographic markets. There can be no assurance that the Company will be able to fully implement its strategy or that the anticipated results of this strategy will be realized. Implementation of this strategy could also be affected by a number of factors beyond the Company's control such as manufacturing difficulties, disruption of distribution systems, or general or local economic conditions. Any material failure to implement its strategy could have a material adverse effect on the Company's business, financial condition and results of operations. RAW MATERIAL PRICES AND AVAILABILITY A substantial portion of the cost of manufacturing the Company's products is the cost of raw materials, primarily petroleum based resins. Historically, there have been fluctuations in these raw material prices due to factors which are beyond the Company's control, and in some instances price movements have been volatile when associated with outside influences. There can be no assurance that the Company will be able to pass on raw material price increases in the future. Further, in the past, there have been shortages from time to time in the supply of certain resins. There can be no assurances that the Company will not be subject to such shortages in the future. EXCHANGE RATE RISKS The Company's result of operations were reported in Canadian dollars through December 31, 1998. Commencing January 1, 1999, due to increased activity in the U.S., the Company adopted the U.S. dollar as its reporting currency. Since the trading price in the United States of the Common Shares of the Company is quoted in U.S. dollars, any weakening of the Canadian dollar relative to the U.S. dollar could result in a decline in the market value and trading price of the Common Shares measured in U.S. dollars. The exchange rate between Canadian dollars and U.S. dollars has varied significantly over the last five years. NEW PRODUCT DEVELOPMENT The Company's business plan involves the introduction of new products, which are both developed internally and acquired through acquisition. There can be no assurance that the market will accept these products or that competitors will not introduce similar products, which will impact the company's ability to expand its markets and generate organic growth. PART I ITEM 1. DESCRIPTION OF BUSINESS. GENERAL Intertape Polymer Group develops, manufactures and sells a variety of specialized polyolefin plastic packaging products. These products include INTERTAPE-Registered Trademark- pressure-sensitive and water-activated tape, EXLFILM-TM- shrink film ("EXLFILM-TM-"), STRETCHFLEX-Registered Trademark- stretch wrap ("STRETCHFLEX-Registered Trademark-") and woven products. Most of the Company's products are derived from resins that are converted into films and adhesives. Resins also are combined with paper and converted into a variety of packaging products. Vertical integration, whereby the Company performs each step in the conversion of polyolefin resins and paper into its various products, and continuous capital expenditures to increase manufacturing efficiencies allow the Company to be among the low-cost producers of each product it manufactures. This vertical integration combined with the use of high speed production equipment provides competitive advantages to the Company in flexibility and control of the manufacturing process and in speed of delivery. Management considers all of its products to be within one operational segment because all products are made basically from similar extrusion processes and differ only in the final stages of manufacturing. The Company's most recent expansion of its product offering occurred with its 1999 acquisitions of Spinnaker Electrical Tape Company, a U.S. manufacturer of pressure-sensitive electrical tapes, and Central Products Company, a U.S. manufacturer of a natural rubber pressure-sensitive tape. Central Products Company also manufactured hot melt and acrylic pressure-sensitive tapes, and a line of water-activated carton sealing tapes, giving the Company what it now believes to be 70% of the market. The Company's revenues are derived primarily from sales of its products in the United States and Canada, with approximately 95% of the Company's 1999 revenues attributable to sales from manufacturing facilities in the United States. The Company is headquartered in Montreal, Quebec and maintains approximately 2.9 million square feet of manufacturing facilities throughout the United States, Canada and Portugal. 2 The registered office of the Company is located at 1155 Rene-Levesque Boulevard West, Suite 4000, Montreal, Quebec, Canada H3B 3V2, and its principal executive offices are located at 110E Montee de Liesse St. Laurent, Quebec, Canada H4T 1N4. The Company's telephone number at its principal executive offices is (514) 731-0731. HISTORY The Company's business was established in 1981 by Melbourne F. Yull, Intertape Polymer Group's Chairman of the Board and Chief Executive Officer, when Intertape Systems Inc. ("Systems"), a predecessor of the Company, established a pressure-sensitive tape manufacturing facility in Montreal. Intertape Polymer Group was incorporated under the laws of Canada in 1989 and in February 1992, completed an initial public offering of its Common Shares at the offering price of $4.25 (CDN$5.035) (after giving effect to a 2:1 stock split on June 4, 1996). The Company's Common Shares were previously listed on the American Stock Exchange and, commencing August 1999, are now listed on the New York Stock Exchange. In addition, since January 1993, the Company's Common Shares have been listed on The Toronto Stock Exchange. The Company completed a second public offering of its Common Shares in Canada and the United States in October 1995, at the offering price of $14.60 (CDN$19.75). The Company completed a third public offering of its Common Shares in Canada on a "bought deal" basis in March 1999, at the offering price of $26.31 (CDN$40.25) per share. The Company has pursued a strategy of aggressive growth through both substantial capital investments and acquisitions (See "Acquisition History" below). When the Company commenced operations in 1981, it converted purchased films into pressure-sensitive carton sealing tapes. Originally intended as a local manufacturer, management of the Company decided in the mid-1980's to take advantage of the extraordinary growth in demand for carton sealing tapes by significantly expanding its output of such product and, thereby, its customer base. Following adoption of this new business plan and over the next few years, the output of the Montreal plant doubled and a new facility was constructed in Danville, Virginia, in 1987. The Virginia plant was "upstream integrated" to include film extrusion, thereby reducing material cost. The market for carton sealing tape has continued to grow and the Danville facility is five times larger (measured in capacity) today than at the date of its construction. Even as the Company was growing its customer base in pressure-sensitive tapes, it pursued an aggressive policy of new product development to leverage its pressure-sensitive tape products. In 1992, the Company developed a new variety of speciality shrink films and purchased and installed manufacturing equipment to produce such films. The ability to manufacture its own shrink films enabled the Company to participate in the shrink film market estimated to be $500 million annually. Further, it strengthened the Company's position with its customers. The Company's entry into the stretch wrap market began with the Company's concurrent development of stretch wrap products with the processes to manufacture such products. The 3 Company entered the stretch wrap market (estimated at $1 billion annual sales in 1996) utilizing its existing customer base and distribution network. To broaden the product line and provide one-stop shopping with a "basket of products", the Company has made a series of acquisitions. Interpack Machinery Inc. ("Interpack"), a designer of automatic carton sealing equipment, was acquired by the Company in 1993. In acquiring Interpack, the Company gained technology for systems capable of utilizing large volumes of high value carton sealing tapes. Tape, Inc. was acquired in 1996 to provide a complete line of water-activated tapes. American Tape Co. ("American Tape") was acquired in 1997 bringing to the Company products including high performance masking, filament and speciality products, which mesh well with the Company's related product lines. Anchor Continental, Inc. ("Anchor") was acquired in 1998 and was a main competitor of the Company for the sale of masking tapes. Rexford Paper Company ("Rexford"), a redistributor of a variety of pressure-sensitive tapes, as well as a manufacturer of water-activated tapes, was also acquired in 1998. In 1999, the Company acquired Spinnaker Electrical Tape Company ("SETco"), bringing a new product line, pressure-sensitive electrical tapes, to the Company. In addition, in 1999, the Company also acquired Central Products Company ("CPC"), one of its competitors for the sale of both pressure-sensitive and water-activated carton sealing tapes. The combination of these various product lines enables the Company to offer the market place a range of products to service its customers' needs. The Company also markets products directly to the end user. Polymer International (N.S.) Inc. ("Polymer International") and International Container Systems, Inc. ("International Container") were acquired in 1989. Polymer International manufactures a wide range of coated, woven polyolefin fabrics; International Container manufactures returnable plastic cases for the beverage industry. Since acquiring Polymer International, sales of the Company's woven product line have increased five-fold, assisted in part by the development of lumber wrap and other products. In addition, two small companies (Cajun Bag & Supply Corp. and Augusta Bag & Supply Co.) were purchased to produce flexible intermediate bulk containers ("FIBC's") utilizing the Company's fabric as the prime raw material. During 1999, the Company participated in two joint ventures: Fibope Portuguesa-Filmes Biorientados, S.A. ("Fibope") and IFCO-U.S., L.L.C. ("IFCO"). Fibope produces shrink films in Portugal for the European market and has doubled its manufacturing capacity since 1995. IFCO is a provider of returnable plastic cases for the produce industry. The Company, however, sold its interest in IFCO in March 2000. The capital resources will now be utilized in other areas of the Company's business expected to provide higher rates of return. Until 1998, the majority of the Company's growth came from the sale of internally developed products. Capacity increases are ongoing throughout the organization and all product lines. The Company's Utah manufacturing facility, a 115,000 square foot plant, became operational in June 1998, and was expanded further in 1999. Consistent with the Company's strategy, this plant is acting not only as a producer of shrink and stretch films, but also as a distribution center for all of the Company's products to increase sales in the western United States and western Canada. 4 The Company is a holding company which owns various operating companies in the United States and in Canada. Intertape Polymer Inc., a Canadian corporation ("IPI"), is the principal operating company for the Company's Canadian operations. Intertape, Inc., a Virginia corporation, formerly known as Intertape Polymer Corp. ("IPC"), is the principal operating company for the Company's United States and international operations including, most notably, each of the businesses referenced in the acquisition table set forth below. As of May 17, 2000, the Company had 28,297,392 Common Shares outstanding. Unless the context otherwise requires, the terms "Intertape Polymer Group" and the "Company" are used to refer to Intertape Polymer Group Inc. together with all of its wholly-owned subsidiaries and joint ventures. Where the context requires, such terms also include the predecessors of Intertape Polymer Group. All dollar amounts referenced in this Annual Report are in U.S. dollars unless otherwise indicated. ACQUISITION HISTORY In addition to internally generated growth, the Company has engaged in a series of acquisitions. The Company believes it now ranks among the leading developers and manufacturers of industrial plastic packaging products in North America. The following table illustrates the principal acquisitions completed by the Company during the last five years:
COMPLETED ACQUISITIONS - -------------------------------------------------------------------------------------------------------- Annual Cost of Year Acquisitions Company Location Products - ---- -------------- ----------------------- ------------------------ ---------------------- ($in millions) 1997 $ 42.9 American Tape Co. Marysville, Michigan Pressure-sensitive Richmond, Kentucky tapes, masking tapes 1998 $113.2 Anchor Continental, Inc. Columbia, South Carolina Pressure-sensitive tapes, masking and duct tapes Rexford Paper Company Milwaukee, Wisconsin Pressure-sensitive and water-activated tapes 1999 $111.3 Central Products Company Menasha, Wisconsin Pressure-sensitive and Brighton, Colorado water-activated carton sealing tapes Spinnaker Electrical Tape Carbondale, Illinois Pressure-sensitive Company electrical tapes
5 BUSINESS STRATEGY The Company's overall objective is to gain market share in large niche markets which it believes are growing at rates faster than the economy as a whole. The Company's strategies for achieving this objective are as follows: - SOLIDIFY THE COMPANY'S POSITION AS A LOW-COST MANUFACTURER. The Company has pursued a vertically integrated manufacturing strategy as a means of controlling the costs of its manufacturing inputs and, in connection therewith, has made substantial investments in high-speed production equipment and various forms of manufacturing automation. For example, during the past several years the Company has installed various extrusion lines of equipment for the making of film for pressure-sensitive carton sealing tapes. This allows the Company to buy resin as a basic raw material to produce its own films and adhesives rather than purchase them from other manufacturers at greater cost. In addition, the Company continually undertakes initiatives to reduce waste at its production facilities as a means of further controlling its manufacturing costs. - INCREASE MANUFACTURING CAPACITY. The Company believes that increasing manufacturing capacity at its existing plants will contribute to its ability to increase market share in its current markets. Over the past five years, the Company has achieved an increase in its coating capability at its Danville plant, an increase in its output of woven products from its Truro facility and a doubling of the EXLFILM-TM- production capacity at its Truro facility. In addition, the Company commenced EXLFILM-TM- and STRETCHFLEX-Registered Trademark- manufacturing operations at its new facility located in Tremonton, Utah during the second quarter of 1998 and further expanded this facility during 1999. - DEVELOP NEW PRODUCTS. The Company has been increasing its investment in research and development and believes that it can take advantage of its manufacturing strengths and distribution network by introducing new products and product line extensions which complement its existing product base. The Company introduced in 1996 a new stretch wrap product line sold under the STRETCHFLEX-Registered Trademark- trademark. Recent product developments during 1999 have positioned STRETCHFLEX-Registered Trademark- as a leader in new five-layer high performance stretch wrap. EXLFILM-TM- shrink films, launched in 1992, have been the focus of numerous product developments, including the addition of new cross-linking technology that led to the development of EXLFILMPLUS-TM- which gives the Company access to new markets that it did not previously participate in. NOVATHENE-Registered Trademark- woven fabrics have been undergoing continued product development. The Company has completed the successful test of a patented woven fabric that competes with PVC in several major markets. Tape developments continue to focus on performance products targeted to unique applications and specific customers. - DISTRIBUTION CENTERS. The Company has installed in several of its key manufacturing/distribution facilities a Warehouse Management System ("WMS") which will increase efficiency in the storage, shipping and inventory management of all its products located in those facilities. This investment will increase the level of service that 6 the Company provides to its customers, as well as reduce its operating costs in these areas. With recent acquisitions, the Company's management initiated a fresh look at its Supply Chain strategy. The premier consultants in the Supply Chain arena have been engaged to manage the process and guide the Company to reduce its costs, formulate a strategy, train personnel, eliminate inefficiencies and further enhance the Company's ability to service its customers. - EVALUATE FUTURE COMPLEMENTARY ACQUISITIONS. The Company is continually evaluating the attractiveness of other companies, technologies or products that could complement the Company's existing product lines and manufacturing and distribution strengths. The Company considers complementary companies, technologies and products as potential acquisition targets, and evaluates the merits of each such potential acquisition. The Company's purchase of American Tape, Anchor, and CPC are examples of such acquisitions, providing the Company with masking, duct, reinforced filament and printable and non-printable flat back tapes as well as other specialty tapes not previously manufactured by the Company but which can be integrated into the Company's distribution system to broaden the range of products offered to its customers. - EXPAND SALES INTO NEW GEOGRAPHIC MARKETS. The Company intends to continue to exploit the breadth of its product lines, distribution network and strong market position by entering into new markets in both North America and abroad. The Company was able to use its joint venture arrangement with a Portuguese manufacturer of shrink films as a springboard to market some of its North American manufactured products in Europe. In addition, with the acquisitions of American Tape and Anchor, the Company gained a market presence throughout the world in high performance masking tapes and duct tapes. The Company believes that it can build upon this market position in the sale of its other products. The Company expects to increase its penetration in all markets either by enhancing its internal marketing efforts or through joint ventures or acquisitions. PRODUCTS INTERTAPE-Registered Trademark- CARTON SEALING TAPE: PRESSURE-SENSITIVE AND WATER-ACTIVATED TAPE The Company produces a variety of pressure-sensitive plastic film carton sealing tape, ranging from commodity designed standard tape to tape tailored to meet customers' unique requirements. The product range encompasses tape with film thickness from 25 microns to 50 microns and adhesives formulated for manual as well as automatic applications. Carton sealing tape lends itself to use in high speed taping machines that replace other closure methods such as staples, hot melt glues and cold glues. The tape produced by the Company includes a wide range of customized colored and printed tape, as well as tape designed for cold temperature applications and label protection. The Company believes that it is one of the leading manufacturers of pressure-sensitive carton sealing tape and further believes that it is the only manufacturer in North America of all three types 7 of adhesives; hot melt, acrylic, and natural rubber. Carton sealing tape is manufactured and sold under the INTERTAPE-Registered Trademark- name to industrial distributors and manufactured for other customers for sale under private labels. It is produced at the Company's Danville, Montreal, Richmond and Columbia facilities and is utilized by end-users for sealing corrugated cartons. Geographic territories in which the Company markets its products are serviced by sales personnel and manufacturers' representatives coordinated by regional managers. Distributors are appointed on a basis designed to achieve market penetration of both commodity and higher grade products. In 1994, the Company commenced efforts to utilize its expanded production capacity and field support to begin to penetrate the United States west coast and the western Canadian markets and continues to increase its sales force for these markets. The Company expects its centralized warehouse distribution system in the Tremonton, Utah facility will continue to enhance these efforts. In addition, the Company exports its product to Europe, Asia, Central America and South America. The Company's acquisition in 1993 of the assets of Interpack, a manufacturer of equipment used to apply pressure-sensitive tapes to seal corrugated boxes, enabled the Company to further enhance the mix of products it offered to its customers. The Company introduced a line of machines designed for the high-speed application of pressure-sensitive carton sealing tape in January 1994 and has continued to enhance and improve its equipment designs. In 1996, the acquisition of Tape, Inc. added a complete range of water-activated adhesive tapes to the Company's product mix. This product line is generally sold through the same distribution network as pressure-sensitive carton sealing tape which has allowed the Company to increase its market penetration of this product. The Company's 1999 acquisition of CPC, a producer of carton sealing tapes, should serve to provide cost reductions to the Company. In addition, the Brighton, Colorado, facility obtained in the acquisition provides the Company with the needed capacity in hot melt coating and solvent rubber products to form a basis for continued growth in these products. The Company's principal competitor for the sale of carton sealing tape products is Minnesota Mining & Manufacturing Co. ("3M"). INTERTAPE-Registered Trademark- MASKING TAPES: PERFORMANCE AND GENERAL PURPOSE The Company added masking tapes to its product line in December 1997 through the acquisition of American Tape, a leading manufacturer of these products and expanded its position in this product line with the acquisition of Anchor in September 1998. Masking tapes are used for a variety of end-use applications which can be broadly described under two categories: general purpose and performance. General purpose applications include packaging and bundling, and residential and commercial paint applications. Performance applications include use in painting of aircraft, cars, buses and boats, where the properties of the tape, such as high temperature resistance and clean adhesive release, are individually designed for the customer's process. 8 The Company's processing capabilities include solvent and synthetic rubber, hot melt and acrylic adhesive alternatives. The Company believes that its unique adhesive systems provide it with a competitive advantage in this market. The main competitors for the sale of masking tapes include 3M, Shuford Mills, Inc., Industrias Tuk, S.A. de C.V., and Tesa Tape Inc. ("Tesa"). INTERTAPE-Registered Trademark- REINFORCED FILAMENT TAPE: PERFORMANCE AND GENERAL PURPOSE In addition to masking tapes, the Company's purchases of American Tape and Anchor also introduced reinforced filament tapes and flat back tapes to the Company's product line. Reinforced, general and specialty products are manufactured at the Company's facilities in Richmond, Kentucky, Marysville, Michigan and Columbia, South Carolina which were acquired in the American Tape and Anchor acquisitions. These facilities produce filament tape using synthetic, natural rubber and hot melt adhesives coated on a variety of plastic filaments. The reinforcement is provided by fibreglass yarns laminated between two plastic substrates. Many of these filament tapes are odorless, stainless, and provide clean removal and are used in bundling, sealing, unitizing, palletizing and packaging, notably for household appliances. The Company's main competitor in this market is 3M, and for commodity filament tapes the Company's main competitors are Tesa and RJM Manufacturing, Inc. ACRYLIC COATING In 1995, the Company completed a $7.0 million capital expenditure program for an acrylic coater and ancillary equipment design to apply acrylic based adhesives to a wide variety of substrates at its Danville, Virginia plant. These acrylic coatings, when applied to film tapes, offer extended shelf life as well as increased performance under the extremes of low and high temperatures. In addition, certain applications, such as mirror backing, utilize woven products as the base material to which acrylic coating is applied. INTERTAPE-Registered Trademark- DUCT TAPE The acquisition of Anchor provided the Company a significant capacity in the duct tape product line. Duct tapes are manufactured at the Columbia, South Carolina, facility. Approximately 75% of the duct tape volume consists of polyethylene-coated cloth. Aluminum foil type tape accounts for most of the non-polyethylene coated product sales of the Company's duct tape products. The main competitors are Tyko International, Ltd. ("Tyko") and Shurtape Technologies, Inc. EXLFILM-TM- SHRINK WRAP EXLFILM-TM- is a specialty plastic film which shrinks under controlled heat to conform to package shape as compared to other packaging forms that require unique machinery for different product sizes and shapes. The process provides versatility because it permits the over-wrapping of a variety of products of considerably different sizes and dimensions (such as printing and paper 9 products, packaged foods, cassettes, toys, games and sporting goods, and hardware and housewares). The Company manufactures EXLFILM-TM- at its plant in Truro, Nova Scotia, and at its Tremonton, Utah facility. The Company believes that its continued investment in equipment and product development will help it expand in this market. With the development of cross-linking technology, the Company has introduced a new line of high performance shrink film, EXLFILMPLUS-TM-, which can be used to satisfy additional end user applications. The Company's shrink wrap products are sold through a select group of specialty distributors primarily to manufacturers of packaged goods and printing and paper products who package their products internally. In addition, the Company holds a 50% interest in FIBOPE, a manufacturer of shrink films in Portugal. FIBOPE utilizes similar manufacturing equipment as is currently operated by the Company in its Truro and Tremonton facilities. In addition to being served by the Company, the United States and Canadian markets for polyolefin shrink wrap are currently served by two large United States manufacturers, W.R. Grace & Co. and E.I. DuPont de Nemours & Co., and to a lesser extent by foreign manufacturers. STRETCHFLEX-Registered Trademark- STRETCH WRAP STRETCHFLEX-Registered Trademark- is a multi-layer plastic film that can be stretched without application of heat. It is used industrially to wrap pallet loads of various products to ensure a solid load for shipping. The Company has the capacity to produce a total of 130 million pounds of STRETCHFLEX-Registered Trademark- annually at its Danville, Virginia plant and its facility in Tremonton, Utah. During 1999, the Company invested in upgrading all of its cast lines to new five-layer technology. This technology, combined with re-engineered film allows the Company to produce polyolefin stretch wrap that has higher performance while reducing manufacturing costs. The North American market for such polyolefin stretch wrap is served by a number of manufacturers, the largest of which are Tenneco Inc. and Linear Films, Inc. INDUSTRIAL ELECTRICAL TAPES As a result of the Company's 1999 acquisition of SETco, which included its Carbondale, Illinois, facility, the Company is now a manufacturer of specialty electrical and electronic tape. The new manufacturing capability and technology at the Carbondale, Illinois, facility, coupled with the Company's high temperature resistant products manufactured at its Marysville, Michigan, facility is hoped to provide the Company access to new high margin markets. Competing manufacturers of industrial electrical tapes include 3M, Tessa, and Tyko. 10 WOVEN PRODUCTS The Company produces a variety of finished products utilizing coated woven polyolefin fabrics, such as bags and lumber wrap, as well as coated woven polyolefin fabrics that are sold to other manufacturers which convert these fabrics into finished products, such as packaging, protective covers, pond liners, housewrap, recreational products, and temporary structures. Depending on the needs of the customer, the Company produces valve bags or open mouth bags. Valve bags have a one way self-closing filler valve inserted into one corner and are used for packaging pelletized and granular chemicals and other materials. Open mouth bags, which require a secondary closure method such as stitching, are used primarily for packaging of compressed material such as mineral fibers. NOVA-THENE-Registered Trademark- lumber wrap is a polyolefin fabric which is extrusion coated and printed to customer specifications. It is used in the forest products industry to package kiln-dried cut lumber. The Company believes that polyolefin products have certain advantages over traditional paper-plastic laminate products, including superior strength, ease of application, durability, better appearance and the potential to be recycled. The Company added FIBCs to its product line in 1993 with the acquisition of Cajun Bag & Supply Corp. ("Cajun Bag"). To facilitate production of seamless FIBCs in the Crowley, Louisiana plant, the Company installed circular weaving equipment in 1994 in its Truro plant. The Company made additional investments in the Crowley plant in 1995 to reduce costs, increase capacity and reduce turnover. In 1996, the Company opened an FIBC plant in Edmundston, New Brunswick, Canada to meet the growing demands of the industry and purchased the assets of Augusta Bag & Supply Co. ("Augusta Bag") to add further capacity, expand market share and acquire unique manufacturing methods. In 1997, the Company initiated an organizational review of the operations of certain facilities manufacturing FIBCs and, during the latter half of 1997, approved a restructuring plan designed to improve efficiency and reduce operating costs. Specifically, while the Company will continue to produce the fabrics used to make FIBCs, the Company has decided to outsource some of the conversion process to Mexico due to increased foreign competition. As a consequence, during 1997 the Company incurred a one-time charge against earnings in respect of write-downs of certain assets employed in these operations as well as goodwill associated with the Cajun Bag and Augusta Bag acquisitions. The Company recently announced the development of a patent pending Pallet-Free-TM- FIBC product. This new product has significant cost and performance advantages compared to traditional corrugated bulk containers, which compete in the same bulk product markets. The Company also manufactures other coated woven polyolefin fabrics that it supplies to converters which produce finished products for specific application, such as synthetic fiber packaging, temporary and permanent shelters, recreational products, protective covers, pond liners, and flame retardant lattice cloth. During 1999, the Company developed a new patented woven fabric that meets the fire retardant specifications required for human occupancy and maintains the UV 11 specifications for extended outdoor use. This product is used in applications where PVC was the primary fabric previously used. The Company's NOVA-THENE-Registered Trademark- lumber wrap line competes with products manufactured by partially integrated manufacturers and by secondary converters. In addition, the Company competes with manufacturers of coated woven fabrics such as Amoco Fabrics and Fibers Company and Fabrene, Inc., which sell their products to converters. The market for FIBCs is highly competitive and is not dominated by any single manufacturer. SOFT DRINK TRANSPORT AND DISPLAY CASES The Company is engaged in the design, development and sale of reusable plastic soft drink transport and display cases. These cases are manufactured for the Company by independent contractors located throughout North America. This approach is consistent with the Company's goal of being a low-cost producer in each market it serves, as management believes the savings to its customers on freight exceed any potential savings from in-house manufacturing. SALES AND MARKETING As of January 1, 2000, the Company maintained a sales force of 165 personnel. The Company participates in industry trade shows and uses trade advertising as part of its marketing efforts. The Company's overall customer base is diverse, with no single customer accounting for more than 5% of total sales. The Company has one long term contract with a customer which accounts for less than 5% of total sales. Sales for facilities located in the United States and Canada accounted for approximately 88% and 11% of total sales, respectively, in 1998, and approximately 86% and 14% in 1999. The Company has also continued to develop its sales efforts in Europe, Asia, Central America and South America. Management does not intend to achieve more than 10% of its sales outside North America. Export sales currently represent less than 5% of total sales and are included in United States or Canadian sales depending on the manufacturing facility from which the sale originates. The Company sales are primarily focused on distribution products and woven products. Distribution products go to market through a network of paper and packaging distributors throughout North America. Products sold into this segment include carton sealing, masking, duct and reinforced tapes, EXLFILM-TM- and STRETCHFLEX-Registered Trademark-. In order to enhance sales of its pressure-sensitive carton sealing tape, the Company also sells carton closing systems, including automatic and semi-automatic carton sealing equipment. Prior to the acquisition of Interpack, these products were manufactured by others. The Company's EXLFILM-TM- and STRETCHFLEX-Registered Trademark- products are sold through its existing industrial distribution base primarily to manufacturers of packaged goods and printing and paper products which package their products internally. The industrial electrical tapes are sold to the electronics and electrical industries. 12 The Company's woven products group sells its products directly to the end-users. It offers a line of lumberwrap, valve bags, FIBCs and speciality fabrics manufactured from plastic resins. The woven products group markets its products throughout North America. MANUFACTURING; QUALITY CONTROL The Company's philosophy is, where efficient, to manufacture products from the lowest cost raw material and add value to such products by vertical integration. About 80% of the Company's products are manufactured through a process which starts with a variety of polyolefin resins and extrudes them into film for further processing. Over 50 million pounds of wide width biaxially oriented polypropylene film is extruded annually in the Company's facilities. This film is then coated in high-speed equipment with in-house-produced adhesive and cut to various widths and lengths for carton sealing tape. The same basic process applies for reinforced filament tape, which also uses polypropylene film and adhesive but has fiberglass strands inserted between the layers. Specific markets demand different adhesives and the Company manufactures acrylic solvent based rubber and "hot melt" adhesives to respond to all demands. Masking tapes utilize the same process with paper as the coating substrate. Duct tapes utilize a similar process with either polyethylene or aluminum foil type coated cloth. The technology for basic film extrusion, essential to the low cost production of pressure-sensitive tape products, also has been utilized by the Company to expand its product line into highly technical and sophisticated films. Extrusion of up to five layers of various resins is done in four of the Company's plants. These high value added films service the shrink and stretch wrap markets, both of which have high entry barriers. A wide variety of woven products are also part of the Company's family of products. The first manufacturing step in the production of woven products is film extrusion utilizing various resins and additives. These speciality films are slit in line and woven on wide width looms. They are then coated with a variety of resins to provide unique properties for large niche markets. Printing, bag making and FIBC converting enhance the value added on certain products. The Company also designs and sells specialty cases for the reusable containers market. Propriety molds and raw materials are provided to outside contractors which produce cases on an exclusive basis. Continuing product development, investment in new capital equipment and advanced engineering provide the basis that enables the Company to compete in its marketplace. The Company maintains a quality control laboratory and a process control program on a 24-hour basis to monitor the quality of all packaging and woven products it manufactures. At the end of 1999, five of the Company's plants were certified under ISO-9002 quality standards program, and one has been certified under ISO-9001 quality standards program. 13 EQUIPMENT AND RAW MATERIALS The Company purchases mostly custom designed manufacturing equipment, including extruders, coaters, finishing equipment, looms, printers, bag manufacturing machines and injection molds, from manufacturers located in the United States and Western Europe, and participates in the design and upgrading of such equipment. It is not dependent on any one manufacturer for such equipment. Polyolefin resins are a widely produced petrochemical product and are available from a variety of sources worldwide. The Company purchases raw materials from a limited number of vendors with whom, over time, it has developed long-term relationships. The Company believes that such long term relationships, together with the Company's centralized purchasing operations, have enhanced the Company's ability to obtain a continuity of supply of raw materials on competitively favorable purchase terms. Historically, fluctuations in raw material prices experienced by the Company have been passed on to its customers over time. RESEARCH AND DEVELOPMENT; NEW PRODUCTS Prior to 1992, research and development consisted of activities related to adapting new technologies as they emerged within the various manufacturing environments. Management decided to embark upon a program, beginning in 1992, to develop new manufacturing processes, to enhance product performance and to develop new products throughout the Company. In 1994, the Company emphasized developing products for existing markets, and in 1996 established a corporate research and development group to undertake development of new products. Research and development expenses in 1997, 1998 and 1999 totaled $1,456,000, $3,059,000 and $3,901,000, respectively. The Company currently has two active research and development programs; one primarily focused on tape products and the other supporting the film, woven fabric, and FIBC development. These programs have been instrumental in the development of numerous new products including STRETCHFLEX-Registered Trademark-5L and EXLFILMPLUS LTG, which were rolled out during the later part of 1999. Additionally, these teams have developed several new products which will be launched during 2000. The Company believes that the development of these products will allow the Company to expand into the specialty film market which previously was not accessible using conventional products. Research and development is an important factor generating internal growth for the Company. TRADEMARKS AND PATENTS The Company markets its tape products under the registered trademark INTERTAPE-Registered Trademark- and various private labels. The Company's valve or open mouth bags are marketed under the registered trademark NOVA-PAC-Registered Trademark-. Its woven polyolefin fabrics are sold under the registered trademark NOVA-THENE-Registered Trademark-. Its shrink wrap is sold under the trademark EXLFILM-TM-. Its stretch films are sold under the trademark STRETCHFLEX-Registered Trademark-. FIBC's are sold under the trademarks LeGRAND 14 SACK-Registered Trademark- and CAJUN-Registered Trademark- BAGS. The Company has approximately seventy-two registered trademarks, principally in the United States and Canada, including trademarks acquired from American Tape, Anchor, Rexford and CPC. The Company does not have, nor does management believe it important to the Company's business to have, patent protection for its carton sealing tape products. However, the Company has pursued patents in select areas where unique products offer a competitive advantage in profitable markets, primarily in woven products and shrink wrap. The Company currently has twenty-five patents and approximately fifteen patents pending. COMPETITION The Company competes with other manufacturers of plastic packaging products as well as manufacturers of alternative packaging products, such as paper, cardboard and paper-plastic combinations. Management believes that competition, while primarily based on price and quality, is also based on other factors, including product performance characteristics and service. No statistics, however, on the packaging market are currently publicly available. See "Products" for a discussion of the Company's main competitors. The Company believes that significant barriers to entry exist in the packaging market. Management considers the principal barriers to be: (i) the high cost of vertical integration which is necessary to operate competitively, (ii) the significant number of patents which already have been issued in respect of various processes and equipment, and (iii) the difficulties and expense of developing an adequate distribution network. ENVIRONMENTAL REGULATION The Company manufactures and sells a variety of specialized polyolefin plastic packaging products for industrial use at its manufacturing plants throughout North America and through its joint venture in Portugal. The Company is actively promoting environmental solutions, both in the development of its products and in its own manufacturing facilities. Furthermore, the Company's operations are subject to extensive regulation. Federal and state environmental laws applicable to the Company include statutes (i) intended to allocate the cost of remedying contamination among specifically identified parties as well as to prevent future contamination (the "Comprehensive Environmental Response, Compensation, and Liability Act"); (ii) imposing national ambient standards and, in some cases, emission standards, for air pollutants which present a risk to public health or welfare (the "Federal Clean Air Act"); (iii) governing the management, treatment, storage and disposal of hazardous wastes (the "Resource Conservation and Recovery Act"); and (iv) regulating the discharge of pollutants into protected waterways (the "Clean Water Act of 1972"). The Company's use in its manufacturing processes of hazardous substances and the generation of hazardous wastes not only by the Company but by prior occupants of Company facilities suggest that hazardous substances may be present at or near certain of the Company's facilities or may come to be located there in the future. Consequently, the Company is required to monitor closely its compliance under all the various environmental regulations applicable to it. In 15 addition, the Company arranges for the off-site disposal of hazardous substances generated in the ordinary course of its business. Except as described below, the Company believes that all of its facilities are in material compliance with applicable environmental laws and regulations. MICHIGAN FACILITY The Company's environmental due diligence review conducted in 1997 in connection with its acquisition of American Tape revealed certain issues associated with American Tape's use of chemical solvents, primarily toluene, at the Marysville, Michigan, facility in the manufacturing process. Management undertook a comprehensive plan of investigation and remediation at the facility, with the remediation nearly complete. The Company expects the full cost of remediation to be funded through amounts available under a $2 million escrow fund established by the sellers at closing. In addition, the Marysville, Michigan, facility emits toluene and other pollutants. Approximately 95% of the toluene used is recaptured under existing solvent recovery systems or controlled by the regenerative thermal oxidizer pollution control system. The facility's emissions are within the current permitted limitations, and the Company believes that these emissions will meet the Maximum Available Control Technology requirements, which are expected to come into effect in late 2003, although some additional testing or modifications at the facility may be required. The Company believes that ultimate resolution of these matters should not have a material adverse effect on the Company's business or results of operations. EMPLOYEES As of May 1, 2000, the Company employed approximately 2,795 people, 718 of whom held either sales-related, operating or administrative positions and 2,077 of whom were employed in production. These figures reflect the majority of the staff reductions effectuated by the Company in April, 2000. Approximately 66 hourly employees at the Montreal plant are unionized and are subject to a collective bargaining agreement expiring in November 2002. Approximately 113 hourly employees at the Edmundston plant became unionized in February 1997 and are subject to a collective bargaining agreement which expires in October 2000. Approximately 70 hourly employees at the Green Bay plant are unionized and are subject to a collective bargaining agreement which expires on February 28, 2004. Approximately 194 hourly employees at the Marysville plant are unionized and subject to a collective bargaining agreement which expires in May 2002. Approximately 167 hourly employees at the Menasha plant are unionized and subject to a collective bargaining agreement which expires July 31, 2003. Finally, approximately 50 hourly employees at the Carbondale plant are unionized and subject to a collective bargaining agreement which expires March 2, 2001. The Company has never experienced a work stoppage and considers its employee relations to be satisfactory. 16 SPINNAKER ELECTRICAL TAPE COMPANY AND CENTRAL PRODUCTS COMPANY ACQUISITIONS On July 30, 1999, the Company acquired substantially all of the assets of Spinnaker Electrical Tape Company ("SETco"), a subsidiary of Spinnaker Industries, Inc. ("Spinnaker"). SETco is an Illinois manufacturer of pressure-sensitive industrial electrical tapes. The acquisition included a 55-acre facility in Carbondale, Illinois. On August 9, 1999, the Company acquired 100% of the outstanding shares of Central Products Company ("CPC"), also a subsidiary of Spinnaker. CPC is a manufacturer of both pressure-sensitive and water-activated carton sealing tapes sold primarily to industrial distributors. The total cash considerations and estimated transaction costs for both of these acquisitions on a combined basis was approximately $108.1 million. In addition, Spinnaker received 300,000 five-year warrants to purchase the Company's Common Shares at a price per share of $29.50. The acquisition of SETco and CPC has expanded the Company's existing product lines. As a result of the acquisitions, the Company anticipates cost reductions for both its water-activated and pressure-sensitive carton sealing tapes. Also, the CPC facility provides the Company needed capacity in hot melt coating and solvent rubber products to form a basis for continued growth in these products. In addition, the Company believes that the new manufacturing capability and technology obtained as a result of the acquisition of SETco combined with the Company's high temperature resistant products manufactured in the Company's Marysville, Michigan, facility will provide the Company access to new markets. Finally, the Company's acquisitions have positioned the Company as a stronger supplier of industrial tape, second only, in the estimation of management, to 3M in North America, with the additional capability to provide shrink and stretch wrap, a product line 3M does not offer. The Company's status as a low-cost, high value added single source supplier to its individual distributor customer base should lead to continued strong sales growth in the intermediate future. ITEM 2. DESCRIPTION OF PROPERTY. The following table sets forth the principal manufacturing and distribution facilities owned or leased by the Company as at December 31, 1999:
Area Location Use Products (sq. ft.) Title - -------------------- ----------------- --------------------------------- --------- ------------------------- UNITED STATES: Bradenton, Florida Corporate Offices N/A 20,800 Owned Brighton, Colorado Manufacturing Pressure-sensitive carton sealing 211,000 Leased to 2014 tapes Carbondale, Illinois Manufacturing Pressure-sensitive tapes 193,500 Leased for $1 per acre per electrical/electronic year until 2092 with a 99- year extension option
17
Area Location Use Products (sq. ft.) Title - -------------------- ----------------- --------------------------------- --------- ------------------------- Columbia, South Manufacturing and Pressure-sensitive masking and 490,000 Owned Carolina distribution duct tapes Danville, Virginia Manufacturing and Carton sealing tape, 281,000 Owned Distribution STRETCHFLEX-Registered Trademark- acrylic coating Denver, Colorado Warehouse Storage for finished goods 100,000 Leased on 6-month basis Green Bay, Wisconsin Manufacturing and Water-activated adhesive tapes 156,000 Owned Distribution Marysville, Michigan Manufacturing High performance masking, 250,000 Owned filament tape, and specialty pressure-sensitive tape Menasha, Wisconsin Manufacturing Water-activated adhesive tapes 195,000 Owned Rayne, Louisiana Manufacturing and FIBCs 78,000 Leased to September 2000 Distribution Richmond, Kentucky Manufacturing and Carton sealing, masking and 200,000 Owned Distribution reinforced tape Tampa, Florida Corporate offices Display and crate operations 4,000 Leased to February 2003 Tremonton, Utah Manufacturing and EXLFILM-TM-, 115,000 Owned Distribution STRETCHFLEX-Registered Trademark- CANADA: Edmundston, New Manufacturing FIBCs 65,000 Owned Brunswick Lachine, Quebec Manufacturing Carton sealing equipment 13,000 Leased to July 2000 St. Laurent, Quebec Slitting, Carton sealing tape 60,000 Leased March 2001 Warehouse and Corporate Headquarters St. Laurent, Quebec Manufacturing and Carton sealing tape 25,000 Owned Distribution Truro, Nova Scotia Manufacturing Woven products, 260,000 Owned EXLFILM-TM-
ITEM 3. LEGAL PROCEEDINGS. The Company is not a party to, nor is the Company's property the subject of, any pending material litigation, or any litigation which, if adversely determined, would have a material effect, individually or in the aggregate, on the business or financial condition of the Company. The Company is not aware of any material proceedings being contemplated by governmental authorities. ITEM 4. CONTROL OF REGISTRANT. To the knowledge of the Company, there is no person who, or corporation that, beneficially owns or exercises control or direction over shares carrying more than 10% of the voting rights attached to all shares of the Corporation. 18 As of May 17, 2000, the directors and officers of the Company as a group owned beneficially, directly or indirectly, 1,253,973 Common Shares, representing approximately 4% of all Common Shares outstanding. SHAREHOLDER PROTECTION RIGHTS PLAN On August 24, 1993, the shareholders of the Company approved a Shareholders' Protection Rights Plan (the "Rights Plan"). Under the Rights Plan, one Common Share purchase right was issued on September 1, 1993, in respect of each outstanding Common Share and became issuable in respect of each Common Share issued thereafter. The Rights Plan was to have expired on September 1, 1998, however, on May 21, 1998, the Shareholders approved an amendment extending the term of the Rights Plan to September 1, 2003. The effect of the Rights Plan is to require anyone who seeks to acquire 20% or more of the Company's voting shares to make a bid complying with specific provisions. ITEM 5. NATURE OF TRADING MARKET. The Company's Common Shares currently trade on the New York Stock Exchange and The Toronto Stock Exchange under the symbol "ITP". The Common Shares were listed on The Toronto Stock Exchange on January 6, 1993. The Company's Common Shares were listed on the American Stock Exchange until August 23, 1999, at which time they were listed on the New York Stock Exchange. The Common Shares are not traded on any other exchanges. Prior to the February 21, 1992 initial public offering of Common Shares, there was no public market for such shares. As of May 16, 2000, 26% of the Company's Common Shares are held in the United States by 53 record holders in the United States. The following table sets forth high and low sales price information for trading of the Common Shares on the American Stock Exchange in 1998 and on the New York Stock Exchange in 1999: Period High Low ------ ----- ----- 1st Quarter 1998 24.00 20.62 2nd Quarter 1998 24.00 20.12 3rd Quarter 1998 25.38 18.12 4th Quarter 1998 25.50 16.25 Period High Low ------ ----- ----- 1st Quarter 1999 27.25 24.87 2nd Quarter 1999 29.62 25.87 3rd Quarter 1999 33.37 27.12 4th Quarter 1999 29.00 23.56 19 The following table sets forth high and low sales price information for trading of the Common Shares on The Toronto Stock Exchange in 1998 and 1999: Period High Low ------ ----- ----- CDN.$ CDN.$ 1st Quarter 1998 34.00 30.00 2nd Quarter 1998 35.00 29.00 3rd Quarter 1998 38.28 25.75 4th Quarter 1998 39.00 25.75 Period High Low ------ ----- ----- CDN.$ CDN.$ 1st Quarter 1999 41.75 37.25 2nd Quarter 1999 44.25 38.00 3rd Quarter 1999 49.50 39.85 4th Quarter 1999 42.80 34.50 ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS. There are no governmental laws, decrees or regulations in Canada that restrict the export or import of capital, including, but not limited to, foreign exchange controls, or that affect the remittance of dividends, interest or other payments to nonresident holders of the Common Shares, other than withholding tax requirements. Any such remittances, however, are subject to withholding tax. There is no limitation imposed by Canadian law or by the charter or other constituent documents of the Company on the right of nonresident or foreign owners to hold or vote Common Shares, other than the Rights Plan discussed in ITEM 4 above or as provided in the INVESTMENT CANADA ACT (Canada) (the "INVESTMENT CANADA ACT"). The following summarizes the principal features of the Investment Canada Act. The INVESTMENT CANADA ACT requires certain "non-Canadian" (as defined in the INVESTMENT CANADA ACT) individuals, governments, corporations and other entities who wish to acquire control of a "Canadian business" (as defined in the INVESTMENT CANADA ACT) to file either a notification or an application for review with the Director of Investments appointed under the INVESTMENT CANADA ACT. The INVESTMENT CANADA ACT requires that in certain cases an acquisition of control of a Canadian business by a "non-Canadian" must be reviewed and approved by the Minister responsible for the INVESTMENT CANADA ACT on the basis that the Minister is satisfied that the acquisition is "likely to be of net benefit to Canada", having regard to criteria set forth in the INVESTMENT CANADA ACT. With respect to acquisitions of voting shares, generally only those acquisitions of voting shares of a corporation that constitute acquisitions of control of such corporation are reviewable 20 under the INVESTMENT CANADA ACT. The INVESTMENT CANADA ACT provides detailed rules for the determination of whether control has been acquired. For example, the acquisition of one-third or more of the voting shares of a corporation may, in some circumstances, be considered to constitute an acquisition of control. Certain reviewable acquisitions of control may not be implemented before being approved by the Minister. If the Minister does not ultimately approve a reviewable acquisition which has been completed, the non-Canadian person or entity may be required, among other things, to divest itself of control of the acquired Canadian business. Failure to comply with the review provisions of the INVESTMENT CANADA ACT could result in, among other things, a court order directing the disposition of assets of shares. ITEM 7. TAXATION. CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO U.S. RESIDENTS The following is a summary of the principal Canadian federal income tax considerations generally applicable to a person who is a U.S. Holder. In this summary, a "U.S. Holder" means a person who, for the purposes of the CANADA-UNITED STATES INCOME TAX CONVENTION (1980) (the "Convention"), is a resident of the United States for purposes of the Convention and who, for the purposes of the INCOME TAX ACT (Canada) (the "Canadian Tax Act"), deals at arms's length with the Company, does not use or hold and is not deemed to use or hold the Common Shares in carrying on business in Canada and who holds his Common Shares as capital property. Generally, Common Shares will be considered to be capital property to a U.S. Holder provided the U.S. Holder does not hold the Common Shares in the course of carrying on a business and has not acquired the Common Shares in one or more transactions considered to be an adventure or concern in the nature of trade. This summary is not applicable to a U.S. Holder that is a "financial institution" for purposes of the mark-to-market rules in the Canadian Tax Act and to Insurers who carry on an insurance business in Canada and elsewhere whose Common Shares are "designated insurance property." The summary is based upon the Convention, the current provisions of the Canadian Tax Act, the regulations thereunder, and proposed amendments to the Canadian Tax Act and regulations publicly announced by or on behalf of the Minister of Finance, Canada, prior to the date hereof. It does not otherwise take into account or anticipate any changes in law, whether by legislative, governmental or judicial decision or action. The discussion does not take into account the tax laws of the various provinces or territories of Canada. It is intended to be a general description of the Canadian federal income tax considerations and does not take into account the individual circumstances of any particular shareholder. This summary is of a general nature only and U.S. Holders should consult their own tax advisors with respect to the income tax consequences to their holding and disposing of Common Shares having regard to their particular circumstances. DIVIDENDS U.S. Holders will be subject to a 15% withholding tax on the gross amount of dividends paid or credited or deemed to be paid or credited to them by the Company. In the case of a U.S. Holder 21 that is a corporation which beneficially owns at least 10% of the voting stock of the Company, the applicable withholding tax rate on dividends is 5%. A purchase of Common Shares by the Company (other than a purchase in the open market in the manner in which shares are normally purchased by a member of the public) will give rise to a deemed dividend equal to the amount paid by the Company on the purchase in excess of the paid-up capital of such shares, determined in accordance with the Canadian Tax Act. Any such deemed dividend will be subject to non-resident withholding tax, as described above, and will reduce the proceeds of disposition to a holder of Common Shares for the purposes of computing the amount of his capital gain or loss arising on the disposition. DISPOSITIONS A U.S. Holder will not be subject to tax under the Canadian Tax Act in respect of any capital gain arising on a disposition of Common Shares (including on a purchase by the Company) unless such shares constitute taxable Canadian property and the U.S. Holder is not entitled to relief under the Convention. Generally, Common Shares will not constitute taxable Canadian property of a U.S. Holder unless, at any time during the five year period immediately preceding the disposition of the Common Shares, the U.S. Holder, persons with whom the U.S. Holder did not deal at arm's length or the U.S. Holder together with such persons, owned, had an interest or option in respect of, or otherwise had a right to acquire, not less than 25% of the issued shares of any class or series of the capital stock of the Company. In any event, under the Convention, gains derived by a U.S. Holder from the disposition of Common Shares will generally not be taxable in Canada unless the value of the Company's shares is derived principally from real property situated in Canada. Common Shares will constitute taxable Canadian property of a U.S. Holder that is a former Canadian resident who made an election under the Canadian Tax Act to be deemed not to dispose of such shares on the U.S. Holder's departure from Canada. Such U.S. Holders may not be eligible to claim the exemption provided in the Convention for gains realized on a disposition of Common Shares if they were resident in Canada at any time during the ten year period immediately preceding the disposition. ITEM 8. SELECTED FINANCIAL DATA. Set forth below are selected and consolidated financial data for each of the years ended December 31, 1995, 1996, 1997, 1998 and 1999, which have been derived from consolidated financial statements that have been audited by Raymond Chabot Grant Thornton, General Partnership, independent chartered accountants. Please note, the financial statements of the Company were presented in Canadian dollars up to December 31, 1998. As a result of business acquisitions and increasing activities in the United States, the Company adopted the U.S. dollar as its reporting currency effective January 1, 1999. In accordance with generally accepted accounting principles in Canada, for periods up to and including December 31, 1998, amounts pertaining to the consolidated financial statements and notes thereto 22 were converted into U.S. dollars using a translation of convenience with the December 31, 1998 exchange rate of CDN$1.5305 per U.S.$1.00. For years after December 31, 1998, the accounts of the Company's operations having a functional currency other than the U.S. dollar have been translated into the reporting currency using the current rate method as follows: assets and liabilities have been translated at the exchange rate in effect at the year end and revenues and expenses have been translated at the average rate during the year. All translation gains or losses of the Company's net equity investments in these operations have been included in the accumulated foreign currency translation adjustments account in shareholders' equity. Changes in this account for all periods presented result solely from the application of this translation method. Transactions denominated in currencies other than the functional currency have been translated into the functional currency as follows: monetary assets and liabilities have been translated at the exchange rate in effect at the end of each year and revenues an expenses have been translated at the average exchange rate for each year; non-monetary assets and liabilities have been translated at the rates prevailing at the transaction dates. Exchange gains and losses arising from such transactions are included in earnings.
Year Ended December 31, -------------------------------------------------------- 1995 1996 1997 1998 1999 -------- -------- -------- -------- -------- INCOME STATEMENT DATA Amounts Under Canadian GAAP (1) Sales $147,258 $177,247 $227,553 $378,030 $569,947 Cost of Sales 104,015 125,938 164,558 271,971 445,322 -------- -------- -------- -------- -------- Gross Profit 43,243 51,309 62,995 106,059 124,625 -------- -------- -------- -------- -------- Selling, general and administrative expenses 17,034 21,493 27,281 46,747 85,330 Amortization of goodwill 1,150 1,163 1,542 3,330 5,451 Research and development expenses 721 1,152 1,456 3,059 3,901 Financial expenses 2,087 1,107 2,122 12,429 22,149 -------- -------- -------- -------- -------- 20,992 24,915 32,401 65,565 116,831 -------- -------- -------- -------- -------- Earnings before restructuring charges and income taxes 22,250 26,394 30,594 40,494 7,794 Restructuring charges 17,717 -------- -------- -------- -------- -------- Earnings before income taxes 22,250 26,394 12,877 40,494 7,794 Income taxes 8,167 7,710 3,992 11,743 (304) -------- -------- -------- -------- -------- Net Earnings -- Canadian GAAP 14,083 18,684 8,885 28,751 8,098 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Earnings per share -- Canadian GAAP Basic 0.67 0.77 0.36 1.14 0.29 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Fully diluted 0.63 0.74 0.35 1.10 0.29 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Net earnings -- US GAAP 14,422 18,919 8,885 28,751 8,098 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Earnings per share -- U.S. GAAP Basic 0.69 0.78 0.36 1.14 0.29 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Fully diluted 0.65 0.75 0.35 1.10 0.29 ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
23
Year Ended December 31, -------------------------------------------------------- 1995 1996 1997 1998 1999 -------- -------- -------- -------- -------- BALANCE SHEET DATA Amounts Under Canadian GAAP(1) Working capital $ 62,510 $ 52,936 $ 50,435 $(11,313) $ 64,229 Total assets 196,367 227,754 397,179 622,152 815,006 Long-term debt 35,727 41,833 150,321 209,842 336,015 Total liabilities 66,985 75,577 233,961 427,903 533,003 Shareholders' equity 129,382 152,177 163,412 194,249 282,003
- -------------------------- (1) In certain respects, Canadian GAAP differs from US GAAP. For a more extensive discussion of the differences between Canadian GAAP and U.S. GAAP, see Note 20 to the consolidated financial statements set forth in the 1999 Annual Report to Shareholders which is attached as Exhibit 2.1 to, and incorporated by reference in, this Annual Report on Form 20-F. The Company has no written policy for the payment of dividends. The following table sets forth a five-year summary of dividends per share:
DECLARATION DIVIDEND TOTAL DATE DATE PAID ----------- -------- ----- ---- CDN U.S. CDN$ March 14, 1995 $ .07 $ .05 $1,400,000 March 30, 1995 February 28, 1996 .085 .06 $2,000,000 March 22, 1996 March 4, 1997 .10 .073 $2,500,000 March 27, 1997 March 10, 1998 .013 .092 $3,300,000 March 31, 1998 March 9, 1999 .16 .106 $4,500,000 April 5, 1999 May 15, 2000 .16 .106 $4,500,000 To be paid June 8, 2000
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Reference is made to "Management's Discussion and Analysis" on Pages 8 through 20 of Registrant's 1999 Annual Report to Shareholders, which is incorporated herein by reference and which is included as Exhibit 2.1 to this Annual Report on Form 20-F. 24 ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. (a) QUANTITATIVE INFORMATION ABOUT MARKET RISK The following table provides information about the Company's financial statements that are sensitive to changes in interest rates, which include the Company's bank indebtedness, credit facilities, and long-term debt. For long- term debt, the table presents principal cash flows and related interest by expected maturity dates. As of December 31, 1999:
Expected Maturity Date ---------------------- 1999 2000 2001 2002 2003 2004 Thereafter Total Fair Value ---- ---- ---- ---- ---- ---------- ----- ---------- Long-term Debt $2,079(1) $59,531 $1,242 $463 $422 $274,357 $338,094 $333,193(2)
- ------------------------------------------------- 1. Long-term debt consists of the following: (a) Series A and B Senior Notes: Senior unsecured U.S. Dollar notes, bearing interest at an average rate of 7.78%, payable semi-annually. The Series A $25 million notes are repayable on May 31, 2005, and the Series B $112 million notes are repayable in semi-annual amounts between November 30, 2005, and May 31, 2009. (b) Senior Notes: Senior unsecured notes, bearing interest at 6.82%, payable semi-annually, maturing March 31, 2008. (c) $8,000,000 Series 3 Notes: Senior unsecured U.S. Dollar notes, bearing interest at an effective rate of 8.08% (7.78% in 1998), payable semi-annually. These notes mature on June 1, 2001. The Series 1 and 2 Unsecured Notes were repaid during the year with a portion of the proceeds from the Series A and B Senior Unsecured Notes. (d) Bank loan under a revolving credit facility: Senior unsecured U.S. dollar bank loan under a $50 million revolving credit facility maturing July 15, 2001. This loan bears interest at U.S. prime rate or LIBOR plus a premium varying from 0.4% to 0.625%. As at December 31, 1999, the effective interest rate pertaining to the bank loan was 7.0% (6.9% in 1998). 25 (e) Other Debt: Consists of government loans, mortgage loans in a joint venture, obligations related to capitalized leases and other loans at fixed and variable interest rates ranging from interest-free to 8.25% and requiring periodic principal repayments through 2008. 2. For all debts with fixed interest rates, the fair value has been determined based on the discounted value of cash flows under the existing contracts using rates representing those which the Company could currently obtain for loans with similar terms, conditions and maturity dates. For the debts with floating interest rates, the fair value is closely equivalent to their carrying amounts. The carrying amounts and fair values of the Company's long-term debt as of December 31, 1999, and 1998 are:
1999 1998 ---------------------------- ---------------------------- Fair Value Carrying Amount Fair Value Carrying Amount ---------- --------------- ---------- --------------- $333,193 $338,094 $221,154 $211,844
The Company's bank indebtedness consists of the utilized portion of unsecured demand and revolving bank credit facilities and cheques issued which have not been drawn from the facilities and is reduced by any cash balances. As of December 31, 1999, the Company had: . A senior unsecured bank loan under a $60 million term credit facility which matures April 1, 2000. This loan bears interest at U.S. prime rate or LIBOR plus a premium varying between 1.25% and 1.50%. As of December 31, 1999, the effective interest rate pertaining to the bank loan was approximately 8.1% and $50 million was utilized. . CDN $6 million of revolving credit facilities from Canadian financial institutions of which CDN $0.4 million was utilized as at December 31, 1999. . US$30 million of revolving credit facilities from U.S. and Canadian financial institutions of which US$7.8 million was utilized as at December 31, 1999. The effective interest rate on the used portion of the revolving credit facilities was 8.0% as of December 31, 1999 (8.0% as of December 31, 1998). FOREIGN EXCHANGE RISK MANAGEMENT The Company's objective in managing foreign exchange risk is to protect against cash flow and balance sheet volatility resulting from changes in foreign exchange rates. Substantially all of the Company's revenues are denominated in U.S. dollars. Long-term debt denominated in U.S. dollars exposes the Company to changes in foreign exchange rates. As of December 31, 1999, the Company did not hold any derivative instruments related to foreign currency risk. 26 (b) QUALITATIVE INFORMATION ABOUT MARKET RISK The Company is exposed to various types of market risk in the normal course of business, including the impact of interest rate changes and foreign currency exchange rate fluctuations. The Company does not presently use derivative nor hedging instruments and does not hold derivatives for trading purposes. INTEREST RATE RISK MANAGEMENT AND SENSITIVITY The Company's objective in managing its cash flow exposure to fluctuations in interest rate is to maintain a mix of fixed and variable-rate debt that will limit its exposure to within reasonable risk parameters. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. Changes in interest rates will affect the market value but do not impact earnings or cash flows. Conversely for floating rate debt, interest rate changes generally do not affect the fair market value but do impact future earnings and cash flows assuming other factors are held constant. FOREIGN EXCHANGE RISK MANAGEMENT The Company's objective in managing foreign exchange risk is to protect against cash flow and balance sheet volatility resulting from changes in foreign exchange rates. Substantially all of the company's revenues are denominated in U.S. dollars. Long-term debt denominated in U.S. dollars exposes the Company to changes in foreign exchange rates. As of December 31, 1999, the Company did not hold any derivative instruments related to foreign currency risk. YEAR 2000 The Company believes that all of its systems are operating and that no material Year 2000 issues have been encountered. The Company is unaware of any third party Year 2000 issues that would materially affect its financial condition or results of operations. The Company obtained Year 2000 compliance statements from its vendors, suppliers, and other third parties that do business with the Company. Nevertheless, if any Year 2000 issues presently unknown to the Company occur with respect to it or with third party products and business dependencies, the Company might experience a delay or disruption in the delivery of products which could have a material adverse impact on its financial condition and results of operations including, but not limited to, loss of revenue, increased operating costs, loss of customers or suppliers, or other significant disruptions to the Company's business. 27 ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT. The name and office with the Company of each person who is, or has been chosen to become, a Director or executive officer of the Company as of the date hereof are set forth in the following table.
Name Age Position ---- --- -------- Melbourne F. Yull 59 Chairman of the Board, Chief Executive Officer and Director Andrew M. Archibald 54 Chief Financial Officer, Secretary, Treasurer and Vice President Administration Joseph D. Bruno 61 Vice President, Supply Chain Management Jim Bob Carpenter 44 President, Woven Products John T. Fain 49 Vice President, Corporate Marketing Burgess H. Hildreth 58 Vice President, Human Resources James A. Jackson 51 Vice President, Chief Information Officer Lloyd W. Jones 62 Vice President, Procurement H. Dale McSween 50 President, Distribution Products Salvatore Vitale 36 Vice President, Finance Duncan R. Yull 35 Vice President Sales, Distribution Products Gregory A. Yull 33 President, Film Products Eric E. Baker 66 Director Gordon R. Cunningham 55 Director Ben J. Davenport, Jr. 57 Director Irvine Mermelstein 73 Director James A. Motley, Sr. 71 Director Michael L. Richards 61 Director L. Robbie Shaw 56 Director
28 MELBOURNE F. YULL, founder of the Company, has been the Chief Executive Officer and a director of the Company since 1989 and was a director of the predecessor company since 1981. He was President of the predecessor company from 1981 to 1989 and President of the Company until June, 1994. He has been Chairman of the Board since January 1995. ANDREW M. ARCHIBALD has been Chief Financial Officer, Secretary, Treasurer and Vice President Administration since May 1995. He was Vice President Finance from May, 1995, to January 15, 1999. Prior thereto he served as Vice President, Finance and Secretary of the Company since 1989. JOSEPH BRUNO has been Vice President, Supply Chain Management, since December, 1999. He was Vice President, Distribution Products, since September 1, 1998, and was Vice President, Sales & Marketing from April 1996. JIM BOB CARPENTER has been President, Woven Products, since May 1, 1999. JOHN T. FAIN has been Vice President, Corporate Marketing, since October, 1999. BURGESS H. HILDRETH has been Vice President, Human Resources, since October, 1998. JAMES A. JACKSON has been Vice President, Chief Information Officer, since September 1, 1998. LLOYD W. JONES has been Vice President Procurement since December, 1999, and served as Corporate Vice President since June 1994. Previously he was Vice President Manufacturing since 1990. He was also President and a director of International Container Systems, Inc. from 1989 to 1994. International Container was a public company which was merged with Polymer International Corp. ("PIC") in late 1994. Mr. Jones is President of PIC. H. DALE MCSWEEN has been President, Distribution Products, since December, 1999. Prior thereto he served as Executive Vice President and Chief Operating Officer from May 1995, and Senior Vice President since 1990. From 1987 to 1989 Mr. McSween was the President and Chief Executive Officer of Polymer International (N.S.) Incorporated. The Company indirectly acquired all of the shares of Polymer International during 1989, and it became part of Intertape Polymer Inc. in January 1990 in the context of a corporate reorganization. From 1982 to 1987, Mr. McSween was the Director of Sales and Marketing of Polymer International. SALVATORE VITALE has been Vice President Finance since September 1, 1998. He has been Controller of the Company since May 1997. DUNCAN R. YULL, a son of Melbourne F. Yull, has been Vice President Sales Distribution Products, since December, 1999. GREGORY A. YULL, a son of Melbourne F. Yull, has been President, Film Products, since June, 1999. 29 ERIC E. BAKER, has served as a director of the Company since December 1989. He was Chairman of the Board from 1989 to January 1995. GORDON R. CUNNINGHAM has been a director of the Company since May 1998. BEN J. DAVENPORT, JR. has been a director of the Company since June 1994. IRVINE MERMELSTEIN, has been a director of the Company since March 1994. JAMES A. MOTLEY, SR., has been a director of the Company since February 1992. MICHAEL L. RICHARDS has served as a Director of the Company and its predecessor, Systems, since 1981. L. ROBBIE SHAW has been a director of the Company since June 1994. STATEMENT OF COMPANY GOVERNANCE PRACTICES In 1995, The Toronto Stock Exchange adopted a requirement that disclosure be made by each listed company of its corporate governance system by making reference to The Toronto Stock Exchange Guidelines for Corporate Governance (the "Guidelines"). Compliance with the Guidelines is not mandatory but each listed corporation is required to explain where its system of governance differs from the Guidelines. MANDATE OF THE BOARD The mandate of the Board of Directors is to supervise the management of the business and affairs of the Company, including the development of major policy and strategy. The Board meets at least quarterly, and more frequently as required to consider particular issues or conduct specific reviews between quarterly meetings whenever appropriate. Governance responsibilities are undertaken by the Board as a whole, with certain specific responsibilities delegated to the audit and compensation committees as described below. COMPOSITION OF THE BOARD The Company's Board currently consists of eight directors, five of whom are unrelated directors in accordance with the definition of an unrelated director in the Guidelines. CHAIR OF THE BOARD The Board is chaired by a director who is also the Chief Executive Officer of the Company. The Board is of the view that this does not impair its ability to act independently of management due to the independence of the remaining members of the Board and the role of the Board in determining 30 its own policies, procedures and practices, and ensuring that the appropriate information is made available to the Board. COMMITTEES The Board has established two committees, the Audit Committee and the Compensation Committee, to facilitate the carrying out of its duties and responsibilities and to meet applicable statutory requirements. The Guidelines recommend that the Audit Committee be made up of outside directors only and that other board committees should be comprised generally of outside directors, a majority of whom should be unrelated directors. The Audit Committee complies with the Guidelines as it is composed of four outside directors. The Compensation Committee, as presently constituted, does not comply with the Guidelines, inasmuch as it has two related directors and two unrelated directors. The Board has decided not to modify its composition for the reasons outlined below. The following is a description of the Committees of the Board and their mandate: - Audit Committee: The mandate of the Committee is to review the annual financial statements of the Company and to make recommendations to the Board of Directors in respect thereto. The Committee also reviews the nature and scope of the annual audit as proposed by the auditors and management and, with the auditors and management, the adequacy of the internal accounting control procedures and systems within the Company. The Committee also makes recommendations to the Board regarding the appointment of independent auditors and their remuneration and reviews any proposed change in accounting practices or policies. - Compensation Committee: The Committee is responsible for the determination and administration of the compensation policies and levels for the executive officers of the Company and its subsidiaries. The recommendations of the Committee are communicated to the Board of Directors. The compensation of the Chief Executive Officer and the recommendation for the granting of stock options to executive officers are submitted to the Board of Directors for approval. The Chairman and Chief Executive Officer is a member of this Committee. The Board of Directors considers his participation in the Committee as essential and feels he should continue to serve on the Committee provided the other members are outside directors. Mr. Yull does not, however, participate in the Committee's or the Board's deliberations concerning the recommendation on his own compensation. DECISIONS REQUIRING BOARD APPROVAL All major decisions concerning, among other things, the Company's corporate status, capital, debt financing, securities, distributions, investments, acquisitions, divestitures and strategic alliances, are subject to approval by the Board of Directors. In particular, capital investments and other outlays of an aggregate monetary amount of one million dollars or more are subject to the prior approval of the Board of Directors. 31 DIRECTOR RECRUITMENT AND BOARD EFFECTIVENESS All the directors presently in office and proposed to be elected (other than Mr. Cunningham) at the next annual meeting of shareholders have served as directors in good standing of the Company since 1994 and the majority of them have served since it became a reporting issuer in 1992. The Board of Directors has not adopted a formal policy for the recruitment of directors. Participation of directors is expected at all Board of Directors and Committee meetings to which they are called. Directors are asked to notify the Company if they are unable to attend, and attendance at meetings is duly recorded. All the directors have agreed to contribute to the evaluation of their collective as well as their individual performances. SHAREHOLDER COMMUNICATION AND FEEDBACK The fundamental objective of the Company's shareholder communication policy is to ensure open, accessible and timely exchange of information with all shareholders respecting the business, affairs and performance of the Company, subject to the requirements of securities legislation in effect and other statutory and contractual obligations limiting the disclosure of such information. In order to facilitate the effective and timely dissemination of information to all shareholders, the Company releases its disclosed information through news wire services, the general media, telephone conferences with investment analysts and mailings to shareholders. DIRECTORS' AND OFFICERS' INSURANCE The Company maintains directors' and officers' liability insurance covering liability, including defense costs, of directors and officers of the Company incurred as a result of acting as such directors and officers, provided they acted honestly and in good faith with a view to the best interests of the Company. The current limit of insurance is CDN $25,000,000 and an annual premium of $157,000 was paid by the Company in the last completed financial year with respect to the period from December 1999 to December 2000. Claims payable to the Company are subject to a retention of up to $250,000 per occurrence. ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS. Under most circumstances, the Company's bonus policy provides for the payment of bonuses to its officers based on the performance of the Company. Bonuses are paid to certain officers if the net income of their respective divisions reaches a certain percentage of the budgeted net income. Such bonuses are set at 0% of the salary of the particular executive if net income equals 80% of budgeted net income, increasing on a straight line basis to a maximum of 50% (60% with respect to the Chief Executive Officer) as net income increases to 100% of budgeted net income. Bonuses are paid yearly after the receipt of the audited financial statements of the Company. 32 The Company provided certain executive officers with non-cash compensation, including the use of a car or a car allowance and the reimbursement of related expenses, during the year ended December 31, 1999. Such non-cash compensation for the Company's officers did not exceed an aggregate of $50,000 for that year. The aggregate compensation paid by the Company for the year ended December 31, 1999, to all directors and executive officers as a group, for services in all capacities, was $2,982,288. The aggregate amount accrued or set aside by the Company for the year ended December 31, 1999 to provide pension, retirement or similar benefits, to all directors and executive officers as a group was $4,266,000. The following table sets forth all compensation paid in 1999 in respect of the individuals who were, at December 31, 1999, the Chief Executive Officer and the other four (4) most highly compensated executive officers of the Corporation (the "named executive officers").
Annual Compensation ------------------- Other Annual Name Salary $ Bonus $ Compensation $(1) ---- -------- ------- ----------------- M. F. Yull CDN$668,928 -0- CDN$164,727 D. McSween $288,000 -0- $57,642 A. M. Archibald CDN$340,421 -0- CDN$74,912 K. Rogers $160,000 -0- $37,739 L. W. Jones $238,695 -0- $10,328
- --------------- (1) Perquisites and other personal benefits do not exceed the lesser of $50,000 and 10% of the total of the annual salary and bonus for any of the named executive officers. The amounts in this column related to taxable benefits on employee loans and company contribution to the pension plan. 33 ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES. SHARE PURCHASE WARRANTS As partial consideration for the 1999 acquisitions of SETco and CPC, Spinnaker received 300,000 warrants to purchase the Company's Common Shares at a price per share of $29.50. The warrants expire August 9, 2004. EXECUTIVE STOCK OPTION PLAN In the context of its initial public offering, the Company established an ongoing Executive Stock Option Plan. The ongoing Executive Stock Option Plan of the Company is designed to promote a proprietary interest in the Company among its executives, to encourage the executives to further the development of the Company and to assist the Company in attracting and retaining executives necessary for the Company's long-term success. The Executive Stock Option Plan is administered by the Board of Directors. The shares offered under the Executive Stock Option Plan are Common Shares of the Company. The total number of shares reserved for issuance under the Plan and any other insider stock option or stock purchase plan will not exceed 10% of the issued and outstanding Common Shares of the Company from time to time. The Board of Directors designates from time to time from the eligible executives those to whom options are granted and determines the number of shares covered by such options. Generally, participation in the Plan will be limited to persons holding positions that can have a significant impact on the Company's long-term results. The number of Common Shares to which the options relate will be determined by taking into account, inter alia, the market price of the Common Shares and each optionee's base salary. The exercise price payable for each common share covered by an option will be determined by the Board of Directors, but will not be less than the market value of the underlying Common Shares on the day preceding the grant. The Plan provides that options issued thereunder shall vest 25% per year over four years. As of December 31, 1999, there were outstanding 2,217,224 options to purchase the Company's Common Shares, of which a total of 1,552,948 options to purchase the Company's Common Shares are held by the directors and officers as a group. There were no individual grants of options under the Plan during the fiscal year ended December 31, 1999, to the name executives. The following table sets forth the exercise price and expiration date for all of the currently outstanding options: 34
Number of Option Shares Exercise Price Year Granted Expiration Date ------------- -------------- ------------ --------------- CDN.$ U.S.$ 27,600 $ 5.035 $ 4.250 February 1992 February 2002 70,500 $ 6.125 $ 4.813 January 1993 January 2003 150,000 $ 7.915 $ 6.040 July 1993 October 2003 100,000 $ 8.585 $ 6.406 December 1993 December 2003 24,000 $10.465 $ 7.710 March 1994 March 2004 1,600 $11.175 $ 8.260 October 1994 October 2004 76,450 $11.175 $ 8.135 January 1995 January 2005 39,982 $12.095 $ 8.575 March 1995 March 2005 100,000 $14.890 $10.860 June 1995 June 2005 267,475 $22.500 $16.300 February 1996 February 2006 15,000 $24.780 $17.840 August 1996 August 2006 308,588 $26.510 $19.090 May 1997 May 2003 300,000 $29.030 $20.590 December 1997 December 2003 281,088 $32.920 $23.260 March 1998 March 2004 5,000 $33.900 $23.010 May 1998 May 2004 20,000 $30.650 $19.500 September 1998 September 2004 311,000 $25.860 $16.690 October 1998 October 2004 104,941 $29.750 $19.300 November 1998 November 2004 14,000 $40.670 $27.875 May 1999 May 2005 2,217,224 --------- ---------
In addition, in 1996, certain executive officers were credited notional units, based on salary, related to the market price of the Company's Common Shares. Each such unit credited to the officers corresponded to one common share of the Company. These units did not vest for three years and were paid in full at the end of the three-year period, January 1, 1999. The value of the units fluctuated with share appreciation (and depreciation) and additional entitlements (dividend equivalents) may be awarded by the Company to compensate the holder of these units for any 35 dividends paid to the shareholders of the Company. If employment was terminated during the three-year restriction period, the units were canceled. All notional units have vested under this plan and none remain outstanding. Payments on these units were treated as free-standing Stock Appreciation Rights ("SARs"). The following table sets forth each exercise of options during the fiscal year ended December 31, 1999, by the named executive officers. AGGREGATED OPTION EXERCISES DURING THE FISCAL YEAR ENDED DECEMBER 31, 1999, AND FISCAL YEAR-END OPTION VALUES
Securities Value of Acquired Unexercised Options On Aggregate Unexercised Options at FY-End at FY-End Exercise Value Realized (#) ($) Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable ---- ---------- -------------- ----------------------------- ------------------------- M. F. Yull Nil n/a 347,500 / 296,500 9,795,156 / 8,357,594 D. McSween Nil n/a 163,946 / 77,362 4,621,228 / 2,180,641 A. M. Archibald Nil n/a 155,536 / 67,150 4,384,171 / 1,892,791 K. Rogers 50,000 1,340,500 80,154 / 41,250 2,259,341 / 1,162,734 L. W. Jones 41,026 1,043,019 n/a / 72,250 n/a / 2,121,109
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS. INDEBTEDNESS TO THE COMPANY Officers of the Company are currently indebted to the Company in respect of interest-free loans granted for the purpose of purchasing Common Shares of the Company upon the exercise of options. Such loans are repayable not later than September 30, 2000. As of May 17, 2000, the aggregate indebtedness of all officers to the Company entered into in connection with the purchase of Common Shares was $399,531.00. The following table summarizes the largest amount of the loans outstanding since January 1, 1999, and the amount outstanding on May 17, 2000. 36
Largest amount Name and Municipality outstanding during Amount outstanding of residence fiscal year ended 12/12/99 on May 17, 2000 - --------------------- -------------------------- ------------------ Melbourne F. Yull $369,218 $369,218 Chairman of the Board and Chief Executive Officer Sarasota, Florida H. Dale McSween $30,313 $30,313 President, Distribution Products Sarasota, Florida
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT On July 1, 1998, the Company entered into a new employment agreement with Melbourne F. Yull. Pursuant to the terms of the employment agreement, Mr. Yull agreed to continue to serve as Chairman of the Board and Chief Executive Officer of the Company and its subsidiaries initially at a fixed annual gross salary and subsequently at compensation levels to be reviewed annually by the Company in accordance with its internal policies. The agreement provides for annual bonuses based on budgeted objectives of the Company. The agreement also provides for the payment of 24 months of Mr. Yull's remuneration in the event of termination without cause or resignation within six months of a change of control. Further, it provides for all options for the acquisition of Common Shares of the Company previously granted to Mr. Yull to become immediately vested and exercisable in the event of his termination without cause, or his resignation within six months of a change of control, or his retirement at any time after his 60th birthday or in the event of his death, and that they must be exercised within ninety (90) days following the effective date of such termination, resignation, retirement or death. In addition to his participation in the pension plan, the employment contract provides for Mr. Yull to receive, upon his ceasing to be an employee for any reason, a defined benefit supplementary pension annually for life equal to two percent of his average annual gross salary for the final five years of his employment multiplied by his years of service with the Company. On June 13, 1989, predecessors of Intertape Polymer Inc. entered into an employment agreement with Lloyd W. Jones, whereby he agreed to act as President of a subsidiary as well as in such other positions within the Intertape Polymer Group as would be agreed upon between the parties. The agreement is renewed yearly for an additional one-year term and Mr. Jones' compensation is agreed upon on an annual basis, including the salary and the basis for the determination of the annual bonus. The Company has entered into change-in-control letter agreements dated August 8, 1996 with Messrs. McSween, Archibald, Rogers and Jones. These letter agreements provide that if, within a period of six months after a change in control of the Company, (a) an executive voluntarily 37 terminates his employment with the Company, or (b) the Company terminates an executive's employment without cause, such executive will be entitled to a lump sum in the case of his resignation or an indemnity in lieu of notice in a lump sum in the case of his termination, equal to fifteen months of such executive's remuneration at the effective date of such resignation or termination. In addition, all options for the acquisition of Common Shares of the Company previously granted to such executive under the Plan shall become immediately vested and exercisable and must be exercised within 90 days following the effective date of such resignation or termination. INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS The management of the Company is unaware of any material interest of any director or officer of the Company, of any management nominee for election as a director of the Company or of any person who beneficially owns or exercises control or direction over shares carrying more than 10% of the voting rights attached to all shares of the Company or any associate or affiliate of any such person, in any transaction since the beginning of the last completed fiscal year of the Company or in any proposed transaction that has materially affected or will materially affect the Company or any of its affiliates. PART II Not Applicable PART III ITEM 15. DEFAULTS FROM SENIOR SECURITIES. None Reportable ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES. None Reportable 38 PART IV ITEM 17. FINANCIAL STATEMENTS. Reference is made to the Company's Financial Statements, and the notes thereto, together with the Auditors' Report, on pages 21 through 46 of Registrant's 1999 Annual Report to Shareholders which is incorporated herein by reference and which is included as Exhibit 4 to this Annual Report on Form 20-F, and to the Financial Statement Schedules, together with the Auditor's Report thereon, included as part of this Annual Report on Form 20-F. ITEM 18. FINANCIAL STATEMENTS. Not Applicable ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS. (a) (1) Financial Statements Page(s) Auditors' Report 21 * Consolidated Earnings 22 * Consolidated Retained Earnings 22 * Consolidated Cash Flows 23 * Consolidated Balance Sheets 24 * Notes 1-20 to the Financial Statements 25-46 * (b) Exhibits 1.1 Second Amendment to Restated Credit Agreement dated as of January 22, 1999 1.2 Third Amendment to Restated Credit Agreement with Comerica Bank dated as of May 17, 1999 1.3 Fourth Amendment to Restated Credit Agreement with Comerica Bank dated as of July 15, 1999 1.4 Second Restated Revolving Credit Agreement with Comerica Bank dated as of September 30, 1999 2.1 Registrant's 1999 Annual Report to Shareholders 2.2 Stock Purchase Agreement between Intertape Polymer Group Inc. and Spinnaker Industries, Inc., dated as of April 9, 1999 39 2.3 Asset Purchase Agreement between Intertape Polymer Group Inc., Spinnaker Electrical Tape Company, and Spinnaker Industries, Inc., dated as of April 9, 1999 2.4 IPG Holdings LP and Intertape Polymer Group Inc. Note Agreement dated as of July 1, 1999 2.5 Prospectus regarding public offering of 3,000,000 Common Shares which closed March 16, 1999 3. Auditors' Report 4. Consent of Independent Accountants - ----------------------------- * The financial statements filed as part of this report are incorporated herein by reference to the 1999 Annual Report to Shareholders which is included as Exhibit 2.1 to this Annual Report on Form 20-F. References to page numbers are references to the applicable page in the 1999 Annual Report. 40 SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. INTERTAPE POLYMER GROUP INC. (Registrant) /s/ Andrew M. Archibald, C.A. --------------------------------------- (Signature) Name: Andrew M. Archibald, C.A. Title: Chief Financial Officer, Secretary, Treasurer, and Vice President Administration Date: May 19, 2000 41 Exhibit Index 1.1 Second Amendment to Restated Credit Agreement dated as of January 22, 1999 1.2 Third Amendment to Restated Credit Agreement with Comerica Bank dated as of May 17, 1999 1.3 Fourth Amendment to Restated Credit Agreement with Comerica Bank dated as of July 15, 1999 1.4 Second Restated Revolving Credit Agreement with Comerica Bank dated as of September 30, 1999 2.1 Registrant's 1999 Annual Report to Shareholders 2.2 Stock Purchase Agreement between Intertape Polymer Group Inc. and Spinnaker Industries, Inc., dated as of April 9, 1999 2.3 Asset Purchase Agreement between Intertape Polymer Group Inc., Spinnaker Electrical Tape Company, and Spinnaker Industries, Inc., dated as of April 9, 1999 2.4 IPG Holdings LP and Intertape Polymer Group Inc. Note Agreement dated as of July 1, 1999 2.5 Prospectus regarding public offering of 3,000,000 Common Shares which closed March 16, 1999 3. Auditors' Report 4. Consent of Independent Accountants 42 EX-1.1 2 EXHIBIT 1.1 EXHIBIT 1.1 "COMERICA -- 2ND AMENDMENT" SECOND AMENDMENT TO RESTATED CREDIT AGREEMENT This Second Amendment to Restated Credit Agreement and Note dated as of January 22, 1999 by and among IPG HOLDINGS LP, a Delaware limited partnership ("Borrower"), INTERTAPE POLYMER GROUP INC., a Canadian corporation ("Guarantor") and COMERICA BANK, a Michigan banking corporation ("Bank"). WHEREAS, Borrower, Guarantor and Bank entered into a Restated Revolving Credit Agreement dated as of May 8, 1998 (the "Original Agreement" and as amended by the First Amendment (defined below) the "Agreement"), pursuant to which Borrower incurred certain indebtedness and obligations to Bank and issued to Bank a certain Eurodollar Revolving Note in the face amount of Fifty Million Dollars ($50,000,000) made by Borrower to Bank as of May 8, 1998 ("Note"); WHEREAS, Borrower, Guarantor, and Bank entered into a First Amendment to Credit Agreement dated as of September 1, 1998 (the "First Amendment"), pursuant to which (i) a subfacility in favor of American Tape Co. ("ATC") was established under the Agreement, and (ii) amounts available under the Revolving Facility were limited, inter alia, by amounts outstanding under the ATC Note. WHEREAS, Borrower, Guarantor and Bank desire to amend certain provisions of the Agreement on the terms and conditions hereof; NOW, THEREFORE, it is agreed: A. DEFINITIONS 1. Capitalized terms used herein and not defined to the contrary have the meanings given them in the Agreement. B. AMENDMENT TO AGREEMENT 1. Section 7.1 of the Agreement is hereby amended by restating the definition of "ATC Note" to read, in its entirety, as follows: "`ATC Note' shall mean the Eurodollar Revolving Note made by American Tape Co., Intertape Polymer Corp., and Anchor Continental, Inc., jointly and severally, to the order of Bank as of January 22, 1999 in the face amount of Ten Million Dollars ($10,000,000) and any extensions, renewals or replacements thereof or amendments thereto." C. REPRESENTATIONS Borrower hereby represents and warrants that: 1. Execution, delivery and performance of this Amendment and any other documents and instruments required under this Amendment or the Agreement are within Borrower's powers, have been duly authorized, are not in contravention of law or the terms of Borrower's Certificate of Limited Partnership or Agreement of Limited Partnership, and do not require the consent or approval of any governmental body, agency, or authority. 2. This Amendment, and the Agreement as amended by this Amendment, and any other documents and instruments required under this Amendment or the Agreement, when issued and delivered under this Amendment or the Agreement, will be valid and binding in accordance with their terms. 3. The continuing representations and warranties of Borrower set forth in Sections 10.01 through 10.4 and 10.6 through 10.20 of the Agreement are true and correct on and as of the date hereof with the same force and effect as made on and as of the date hereof. 1 4. The continuing representations and warranties of Company set forth in Section 10.5 of the Agreement are true and correct as of the date hereof with respect to the most recent financial statements furnished to Bank by Company in accordance with Section 11.13 of the Agreement. 5. No Event of Default, or condition or event which, with the giving of notice or the running of time, or both, would constitute an Event of Default under the Agreement, has occurred and is continuing as of the date hereof. D. MISCELLANEOUS 1. This Amendment may be executed in counterparts and shall be deemed to become effective upon such execution and delivery hereof and upon delivery to Bank of each of the other documents listed on the checklist attached hereto as Exhibit "A", all in form and content satisfactory to Bank. 2. Borrower acknowledges and agrees that, except as specifically amended hereby or in connection herewith, all of the terms and conditions of the Agreement and the other loan documents, remain in full force and effect in accordance with their original terms. 3. Except as specifically set forth herein, nothing set forth in this Amendment shall constitute, or be interpreted or construed to constitute, a waiver of any right or remedy of Bank, or of any default or event of default whether now existing or hereafter arising. 4. This Amendment, and the Agreement as amended hereby, shall be interpreted, construed and governed by the laws of the State of Michigan. WITNESS the due execution hereof as of the day and year first above written. COMERICA BANK IPG HOLDINGS LP By: Intertape Polymer Inc. Its: General Partner By: /s/Pamela Horne Eidt By: /s/Sal Vitale Its: Assistant Vice President Its: Assistant Secretary INTERTAPE POLYMER GROUP INC. By: /s/Andrew M. Archibald Its: Chief Financial Officer and Secretary
2 EX-1.2 3 EXHIBIT 1.2 EXHIBIT 1.2 "COMERICA -- 3RD AMENDMENT" THIRD AMENDMENT TO RESTATED CREDIT AGREEMENT This Third Amendment to Restated Credit Agreement and Note dated as of May 17, 1999 by and among IPG HOLDINGS LP, a Delaware limited partnership ("Borrower"), INTERTAPE POLYMER GROUP INC., a Canadian corporation ("Guarantor") and COMERICA BANK, a Michigan banking corporation ("Bank"). WHEREAS, Borrower, Guarantor and Bank entered into a Restated Revolving Credit Agreement dated as of May 8, 1998 (the "Original Agreement" and as amended by the First Amendment (defined below), and the Second Amendment (defined below), the "Agreement"), pursuant to which Borrower incurred certain indebtedness and obligations to Bank and issued to Bank a certain Eurodollar Revolving Note in the face amount of Fifty Million Dollars ($50,000,000) made by Borrower to Bank as of May 8, 1998 ("Note"); WHEREAS, Borrower, Guarantor, and Bank entered into a First Amendment to Credit Agreement dated as of September 1, 1998 (the "First Amendment"), pursuant to which (i) a subfacility in favor of American Tape Co. was established under the Agreement, and (ii) amounts available under the Revolving Facility were limited, inter alia, by amounts outstanding under the ATC Note; WHEREAS, Borrower Guarantor, and Bank entered into a Second Amendment to Credit Agreement dated as of January 22, 1999 (the "Second Amendment"), pursuant to which a subfacility in favor of American Tape Co., Intertape Polymer Corp, and Anchor Continental, Inc. was established under the Agreement; WHEREAS, Borrower, Guarantor and Bank desire to amend certain provisions of the Agreement on the terms and conditions hereof; NOW, THEREFORE, it is agreed: A. DEFINITIONS 1. Capitalized terms used herein and not defined to the contrary have the meanings given them in the Agreement. B. AMENDMENT TO AGREEMENT 1. Section 7.1 of the Agreement is hereby amended by restating the definition of "ATC Note" to read, in its entirety, as follows: "'ATC Note' shall mean the Eurodollar Revolving Note made by American Tape Co., Intertape Polymer Corp.; Anchor Continental, Inc. and IPG (US) Inc., jointly and severally, to the order of Bank as of May 17, 1999 in the face amount of Ten Million Dollars ($10,000,000) and any extensions, renewals or replacements thereof or amendments thereto." C. REPRESENTATIONS Borrower hereby represents and warrants that: 1. Execution, delivery and performance of this Amendment and any other documents and instruments required under this Amendment or the Agreement are within Borrower's powers, have been duly authorized, are not in contravention of law or the terms of Borrower's Certificate of Limited Partnership or Agreement of Limited Partnership, and do not require the consent or approval of any governmental body, agency, or authority. 2. This Amendment, and the Agreement as amended by this Amendment, and any other documents and instruments required under this Amendment or the Agreement, when issued and delivered under this Amendment or the Agreement, will be valid and binding in accordance with their terms. 3 3. The continuing representations and warranties of Borrower set forth in Sections 3.1 through 3.3 and 3.5 through 3.10 of the Agreement are true and correct on and as of the date hereof with the same force and effect as made on and as of the date hereof. 4. The continuing representations and warranties of Company set forth in Section 3.4 of the Agreement are true and correct as of the date hereof with respect to the most recent financial statements furnished to Bank by Company in accordance with Section 5.16 of the Agreement. 5. No Event of Default, or condition or event which, with the giving of notice or the running of time, or both, would constitute an Event of Default under the Agreement, has occurred and is continuing as of the date hereof. D. MISCELLANEOUS 1. This Amendment may be executed in counterparts and shall be deemed to become effective upon such execution and delivery hereof and upon delivery to Bank of each of the other documents listed on the checklist attached hereto as Exhibit "A", all in form and content satisfactory to Bank. 2. Borrower acknowledges and agrees that, except as specifically amended hereby or in connection herewith, all of the terms and conditions of the Agreement and the other loan documents, remain in full force and effect in accordance with their original terms. 3. Except as specifically set forth herein, nothing set forth in this Amendment shall constitute, or be interpreted or construed to constitute, a waiver of any right or remedy of Bank, or of any default or event of default whether now existing or hereafter arising. 4. This Amendment, and the Agreement as amended hereby, shall be interpreted, construed and governed by the laws of the State of Michigan. WITNESS the due execution hereof as of the day and year first above written. COMERICA BANK IPG HOLDINGS LP By: Intertape Polymer Inc. Its: General Partner By: /s/Darlene Persons By: /s/Andrew M. Archibald Its: Vice President Its: Chief Financial Officer INTERTAPE POLYMER GROUP INC. By: /s/Andrew M. Archibald Its: Chief Financial Officer
4 EX-1.3 4 EXHIBIT 1.3 EXHIBIT 1.3 "COMERICA -- 4TH AMENDMENT" FOURTH AMENDMENT TO RESTATED CREDIT AGREEMENT This Fourth Amendment to Restated Credit Agreement and Note dated as of July 15, 1999 by and among IPG HOLDINGS LP, a Delaware limited partnership ("Borrower"), INTERTAPE POLYMER GROUP INC., a Canadian corporation ("Guarantor") and COMERICA BANK, a Michigan banking corporation ("Bank"). WHEREAS, Borrower, Guarantor and Bank entered into a Restated Revolving Credit Agreement dated as of May 8, 1998 (the "Original Agreement" and as amended by the First Amendment (defined below) the "Agreement"), pursuant to which Borrower incurred certain indebtedness and obligations to Bank and issued to Bank a certain Eurodollar Revolving Note in the face amount of Fifty Million Dollars ($50,000,000) made by Borrower to Bank as of May 8, 1998 ("Note"); WHEREAS, Borrower, Guarantor, and Bank entered into a First Amendment to Credit Agreement dated as of September 1, 1998 (the "First Amendment"), pursuant to which (i) a subfacility in favor of American Tape Co. ("ATC") was established under the Agreement, and (ii) amounts available under the Revolving Facility were limited, inter alia, by amounts outstanding under the ATC Note; WHEREAS, Borrower, Guarantor and Bank entered into a Second Amendment to Credit Agreement dated as of January 22, 1999 (the "Second Amendment"); WHEREAS, Borrower, Guarantor and Bank entered into a Third Amendment to Restated Credit Agreement dated as of May 17, 1999 (the "Third Amendment"); WHEREAS, Borrower, Guarantor and Bank desire to amend certain provisions of the Agreement on the terms and conditions hereof; NOW, THEREFORE, it is agreed: A. DEFINITIONS 1. Capitalized terms used herein and not defined to the contrary have the meanings given them in the Agreement. B. AMENDMENT TO AGREEMENT 1. All references to the Note in the Agreement, including, but not limited to the reference in Section 1.3 of the Agreement, shall mean that certain Eurodollar Revolving Note in the principal amount of $60,000,000 executed and delivered by Borrower to Bank of even date herewith as a replacement to that certain Note executed and delivered in connection with the Agreement (the "Replacement Note"). Advance under the Replacement Note are limited by amounts outstanding under the ATC Note (as defined in the Second Amendment, as amended). 2. The definition of "COMMITMENT AMOUNT" set forth in Section 7.1 of the Agreement shall be amended to read as follows: "COMMITMENT AMOUNT" means Sixty Million Dollars ($60,000,000)." C. REPRESENTATIONS Borrower hereby represents and warrants that: 1. Execution, delivery and performance of this Amendment and any other documents and instruments required under this Amendment or the Agreement are within Borrower's and Company's powers, have been duly authorized, are not in contravention of law or the terms of their respective governing instruments, and do not require the consent or approval of any governmental body, agency, or authority. 5 2. This Amendment, and the Agreement as amended by this Amendment, and any other documents and instruments required under this Amendment or the Agreement, when issued and delivered under this Amendment or the Agreement, will be valid and binding in accordance with their terms. 3. The covenants of Borrower and Company set forth in Article V of the Agreement are true and correct as of the date hereof. 4. No Event of Default, or condition or event which, with the giving of notice or the running of time, or both, would constitute an Event of Default under the Agreement, has occurred and is continuing as of the date hereof. D. MISCELLANEOUS 1. This Amendment may be executed in counterparts and shall be deemed to become effective upon such execution and delivery hereof and upon delivery to Bank of each of the other documents listed on the checklist attached hereto as Exhibit "A", all in form and content satisfactory to Bank. 2. Borrower and Company acknowledge and agree that, except as specifically amended hereby or in connection herewith, all of the terms and conditions of the Agreement and the other loan documents, remain in full force and effect in accordance with their original terms. 3. Except as specifically set forth herein, nothing set forth in this Amendment shall constitute, or be interpreted or construed to constitute, a waiver of any right or remedy of Bank, or of any default or event of default whether now existing or hereafter arising. 4. This Amendment, and the Agreement as amended hereby, shall be interpreted, construed and governed by the laws of the State of Michigan. WITNESS the due execution hereof as of the day and year first above written. COMERICA BANK IPG HOLDINGS LP By: Intertape Polymer Inc. Its: General Partner By: /s/Darlene Persons By: /s/Andrew M. Archibald Its: Vice President Its: CFO & Secretary INTERTAPE POLYMER GROUP INC. By: /s/Andrew M. Archibald Its: CFO, Secretary-Treasurer & VP Administration
6 EX-1.4 5 EXHIBIT 1.4 EXHIBIT 1.4 COMERICA--2ND RESTATED AGR SECOND RESTATED REVOLVING CREDIT AGREEMENT THIS SECOND RESTATED REVOLVING CREDIT AGREEMENT is made as of the 30th day of September 1999 by and between IPG HOLDINGS LP, a Delaware limited partnership ("Holdings"), IPG (US) INC., a Delaware corporation ("IPG"; collectively with Holdings, "Borrower"), INTERTAPE POLYMER GROUP INC., a corporation organized under the laws of Canada ("Company") and COMERICA BANK, a banking corporation organized under the laws of Michigan, with principal offices at 500 Woodward Avenue, Detroit, Michigan 48226 ("Bank"). W I T N E S S E T H: WHEREAS, Holdings and Bank are party to a certain Restated Revolving Credit Agreement dated as of May 8, 1998, as amended (collectively, the "Prior Agreement") pursuant to which Bank established a revolving credit facility for Holdings in the amount of Sixty Million Dollars ($60,000,000) which contained a subfacility for IPG (and others) in the amount of $10,000,000 and Holdings delivered to Bank a Eurodollar Revolving Note, as evidence thereof, in the face amount of Sixty Million Dollars ($60,000,000) and IPG (and others) delivered to Bank a Eurodollar Revolving Note, as evidence of the subfacility, in the face amount of Ten Million Dollars ($10,000,000) (collectively, the "Prior Notes"). WHEREAS, Holdings and Company have requested Bank to amend the Prior Agreement and Prior Notes to among other things, add IPG as a Borrower hereunder; WHEREAS, Bank is willing to do so on the terms set forth herein; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree that the Prior Agreement is hereby amended and restated in its entirety as follows: ARTICLE 1 REVOLVING CREDIT FACILITY 1.1 Subject to and upon the terms and conditions herein set forth, the Bank hereby establishes a Revolving Credit Facility in favor of the Borrower ("Revolving Credit") which may be utilized by Borrower by direct advances under Section 1.2 below and/or for Letters of Credit issued under Section 1.4 hereof, provided however that the aggregate principal amount of advances under the Revolving Credit plus the aggregate face amount of Letters of Credit at any one time outstanding, plus the aggregate principal amount of the advances outstanding under the Subfacility Note, shall at no time exceed the Commitment Amount. 1.2 Subject to the provisions of this Agreement, so long as no Event of Default exists, and if no condition exists which, but for the giving of notice or the lapse of time or both, would constitute an Event of Default hereunder, the Borrower may draw upon such Revolving Credit in whole or in part, from time to time, and the amount of any borrowing may be repaid and reborrowed, until the Maturity Date. 1.3 The indebtedness hereunder shall be due and payable in full on the Maturity Date and interest thereon shall accrue and be paid as provided in the promissory note executed by Borrower as evidence of the Revolving Credit in the form attached as Exhibit "A" (the "Note"). 1.4 The Borrower may request the Bank from time to time to issue, for the Borrower's accounts with third parties, letters of credit (called herein, together with any "Letters of Credit" which were issued by Bank pursuant to the Prior Agreement which remain issued and unexpired as of the Closing Date, the "Letters of Credit"), in each case with expiries not later than the earlier of (x) one year and (y) the Maturity Date. In connection with each such request, Borrower shall execute and deliver to Bank, prior to the requested date of issuance, a letter of credit application and agreement in form satisfactory to Bank. 7 1.5 The Borrower shall pay to the Lender (a) a closing fee, on even date herewith, in the amount of , which fee shall be fully earned as of the date hereof and shall not be refundable in whole or part for any reason, (b) with respect to Letters of Credit generally, the Bank's standard charges in connection with processing, issuance, amendments and drawings on letters of credit, which standard charges are set forth in Exhibit B hereto, (c) with respect to standby Letters of Credit, letter of credit fees payable quarterly in arrears on each the first day of each January, April, July and October, in the amount of one percent (1%) per annum on the face amounts thereof, and (d) with respect to trade Letters of Credit, letter of credit fees, payable upon issuance thereof in the amount of three-eighths percent ( 3/8%) per annum of the face amount thereof. ARTICLE 2 PURPOSE OF THE LOAN 2.1 The proceeds of the loan to be made hereunder are to be used (i) in an initial advance to be made on the Closing Date for the purpose of, and in the amount necessary to, repay, by replacement and renewal evidences, indebtedness outstanding under the Prior Note, and (ii) thereafter, for general working capital purposes. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BORROWER Each Borrower, respectively, represents and warrants to the Bank that: 3.1 AUTHORIZATION. The Borrower has the power and authority necessary and has taken all necessary steps in order to be authorized to borrow hereunder and to execute and deliver and perform its obligations under this Agreement and Note in accordance with the terms and conditions thereof and to complete the transactions contemplated herein. This Agreement and the Note have been duly executed and delivered by duly authorized officers of the Borrower and Company and constitute legal, valid and binding obligations of the Borrower and Company, enforceable in accordance with their terms. 3.2 NO VIOLATION TO RESULT. The execution and delivery of this Agreement and the contemplated hereby: (a) are not in violation or breach of, do not conflict with or constitute a default under, and will not accelerate or permit the acceleration of the performance required by, the organizational documents of the Borrower or any note, debt instrument, security agreement or mortgage, or any other contract or agreement, written or oral, to which the Borrower is a party or by which the Borrower or any of its properties or assets are bound; (b) will not be an event which, after notice or lapse of time or both, will result in any such violation, breach, conflict, default, or acceleration; (c) will not result in violation under any law, judgment, decree, order, rule, regulation or other legal requirement of any governmental authority, court or arbitration tribunal whether federal, state, provincial, municipal or local (within the U.S. or otherwise) at law or in equity, and applicable to the Borrower; and (d) will not result in the creation or imposition of any lien, possibility of lien, encumbrance, security agreement, equity, option, claim, charge, pledge or restriction in favor of any third person upon any of the properties or assets of the Borrower. 3.3 NO EXISTING DEFAULTS. To the best knowledge and reasonable belief of the Borrower, there exists no unwaived material default or violation: (a) under any of the material terms of any note, debt instrument, security agreement or mortgage or under any other material commitment, contract, agreement, license, lease or other instrument, whether written or oral, to which it is a party or by which it or any of its properties or assets is bound; 8 (b) under any law, judgment, decree, order, permit, rule, regulation or other legal requirement or any governmental authority, court or arbitration tribunal whether federal, state, provincial, municipal or local (within the U.S. or otherwise), at law or in equity, and applicable to it or to any of its properties or assets, wherein such default would result in a material adverse effect upon the Borrower, its properties or assets; or (c) in the payment of any of its monetary obligations or debts and there exists no condition or event which, after notice or lapse of time or both, would constitute a material default in connection with any of the foregoing. 3.4 NO ADVERSE CHANGES. From the date of the December 31, 1998 financial statements delivered by Company to Bank pursuant to the Prior Agreement: (a) The Borrower has not sustained any damage, destruction or loss, by reason of fire, explosion, earthquake, casualty, labor trouble, requisition or taking of property by any government or agency thereof, windstorm, embargo, riot, act of God or the public enemy, flood, volcanic eruption, accident, other calamity or other similar or dissimilar event (whether or not covered by insurance) adversely affecting the business, properties, financial condition or operations of the Borrower taken as a whole; (b) There have been no changes in the condition (financial or otherwise), business, net worth, assets, properties, liabilities or obligations (fixed, contingent, known, unknown or otherwise) of the Borrower which in the aggregate have had or may have a material adverse effect on the business, properties, financial condition or operations of the Borrower taken as a whole, and there has been no occurrence, circumstance or combination thereof which might reasonably be expected to result in any such adverse effect. 3.5 FULL DISCLOSURE. The information furnished by the Borrower or by any of its directors, officers, employees, agents, accountants or representatives to the Bank or its counsel pursuant to this Agreement (whether furnished prior to, at, or subsequent to the date hereof), the information contained in the Exhibits and Schedules referred to in this Agreement, and the other information furnished to the Bank by the Borrower or by any of their respective directors, officers, employees, agents, accountants or representatives of the Borrower (pursuant to the request of the Bank or otherwise), does not and will not omit to state any material fact necessary to make all such information not misleading. 3.6 TAXES. The Borrower has prepared (or caused to be prepared) and properly filed (or caused to be properly filed) with the appropriate federal, state, provincial, municipal or local authorities (within the U.S. or otherwise) all tax returns, information returns and other reports required to be filed and have paid or accrued (or caused to be so paid or accrued) in full all taxes, interest, penalties, assessments or deficiencies, if any, due to, or claimed to be due by, any taxing authority. The Borrower has not executed or filed with any taxing authority any agreement extending the period for assessment or collection of any taxes. The Borrower is not a party to any pending action or proceeding, nor is any such action or proceeding threatened, by any governmental authority for the assessment or collection of taxes, and no claim for assessment or collection of taxes has been asserted against the Borrower and during the course of any audit currently in process or not completed, no issues have been suggested by any representative of any such governmental authority that, if asserted, would result in a proposed assessment of taxes, interest or penalties, against the Borrower. 3.7 TITLE TO ASSETS. The Borrower has good and marketable title to its property, free and clear of any and all liens, encumbrances, security agreements, equities, options, claims, charges, pledges, restrictions, encroachments, defects in title and easements except for the matters previously disclosed to the Bank in writing. 3.8 LITIGATION. Except as set forth in Exhibit 3.8 hereto, there is no litigation, suit, proceeding, action, claim or investigation, at law or in equity, pending or threatened against the Borrower or its property or assets, before any court, agency, authority or arbitration tribunal, including, without limitation, any product liability, workers' compensation or wrongful dismissal claims, or claims, actions, suits or proceedings relating to toxic materials, hazardous substances, pollution or the environment which are not properly insured. There are no facts known to the Borrower which, if known to the Borrower, to customers, governmental authorities or other persons, might result in any such litigation, suit, proceeding, action, claim or investigation. Except as set forth in 9 such Exhibit 3.8 hereto, the Borrower is not subject to or in default with respect to any notice, order, writ, injunction or decree of any court, agency, authority or arbitration tribunal. 3.9 COMPLIANCE WITH LAWS. To the best of its knowledge and belief, the Borrower has complied with all laws, municipal by-laws, regulations, rules, orders, judgments, decrees and other requirements and policies imposed by any governmental authority applicable to it, its properties or the operation of its business. Without limiting the generality of the foregoing, the Borrower is in full compliance with: (a) all laws relating to the protection of human health and safety, including, without limitation, the Occupational Safety and Health Act of 1970, as amended, and all regulations and standards issued thereunder by the Secretary of Labor or the Occupational Safety and Health Administrator or other governmental agency or authority acting at any time thereunder; (b) all laws relating to protection of the environment, including, without limitation, the Resource Conservation and Recovery Act ("RCRA") and the Comprehensive Environment Response, Compensation and Liability Act ("CERCLA"); (c) all laws administered by the Environmental Protection Agency; (d) all laws relating to equal opportunity; and (e) all zoning, building and other laws, ordinances, rules, regulations, plans and directives of government authorities, Boards of Fire Underwriters and other entities having jurisdiction, as well as all private restrictions and covenants (whether or not registered or of record), in each case without reliance on nonconforming use or similar rule. The Borrower has not received any notice or citation for noncompliance with any of the foregoing, and there exists no condition, situation or circumstance, nor has there existed such a condition, situation or circumstance, which, after notice or lapse of time, or both, would constitute noncompliance with or give rise to future liability with regard to any of the foregoing, except as otherwise disclosed in Exhibit 3.9 hereto. 3.10 TRUE COPIES. All documents furnished or caused to be furnished to the Bank or its counsel by the Borrower or by any of its directors, officers, employees, agents, accountants or representatives are true and correct copies, and there are no amendments or modifications thereto except as set forth in such documents. ARTICLE 4 CONDITIONS OF LENDING 4.1 The obligation of the Bank to make any advance of the loans hereunder or to issue any Letter of Credit shall be subject to the fulfillment of each of the foregoing conditions: (a) PROMISSORY NOTE. The Borrower shall have executed and delivered to the Bank the Note and the Subborrowers shall have executed and delivered to the bank the Subfacility Note, dated the date hereof, incorporated by reference herein and made part hereof. (b) GUARANTEE. Company, shall have executed and delivered to the Bank a Guarantee in respect of each of the Borrower's obligations hereunder, such Guarantee to be in form and substance satisfactory to the Bank's counsel and the Borrower, shall have executed and delivered to the Bank a Guarantee in respect of each of the Subborrower's obligations under the Subfacility Note, such Guarantee to be in form and substance satisfactory to the Bank's counsel. (c) OFFICER'S CERTIFICATE. The Bank shall have received: (i) the certificate of the General Partner of Holdings and the secretary of IPG, certifying as to the Borrower's authority in respect of the borrowing by the Borrower hereunder and the issuance of the Note and the offices and specimen signatures of officers of the Borrower executing any documents delivered to the Bank in connection with the Loan; and (ii) the certificate of the secretary of Company certifying as to the Company's authority to execute and deliver this Agreement and the guarantee and showing the officers and specimen signatures of officers of Company executing and delivering such documents. 10 (d) OPINIONS. The Bank shall have received opinion letters from the legal counsel for the Borrower and the Company covering such matters as the Bank shall require and in form and content satisfactory to the Bank. ARTICLE 5 COVENANTS The Borrower and Company covenant and agree that, until any Note together with interest and all its other indebtedness to the Bank under this Agreement are paid in full, unless specifically waived by the Bank in writing: 5.1 CORPORATE EXISTENCE, ETC. The Company and Borrower will preserve and keep in full force and effect, and will cause each Restricted Subsidiary to preserve and keep in full force and effect, its corporate existence and all licenses and permits necessary to the proper conduct of its business; provided, however, that the foregoing shall not prevent any transaction permitted by Section 5.12. 5.2 INSURANCE. The Company and Borrower will maintain, and will cause each Restricted Subsidiary to maintain, insurance coverage by financially sound and reputable insurers in such forms and amounts and against such risks as are customary for corporations of established reputation engaged in the same or a similar business and owning and operating similar properties in accordance with good business practice. 5.3 TAXES, CLAIMS FOR LABOR AND MATERIALS, COMPLIANCE WITH LAWS. Without limiting any other obligation of the Borrower and Company hereunder including, without limitation, pursuant to the second sentence of this Section 5.3, the Company and Borrower will promptly pay and discharge, and will cause each Subsidiary promptly to pay and discharge, all lawful taxes, assessments and governmental charges or levies imposed upon the Company, Borrower or such Subsidiary, respectively, or upon or in respect of all or any part of the property or business of the Company and Borrower or such Subsidiary, all trade accounts payable in accordance with usual and customary business terms, and all claims for work, labor or materials, which if unpaid might become a Lien upon any property of the Company, Borrower or a Restricted Subsidiary; provided, however, that the Company, Borrower or such Subsidiary shall not be required to pay any such tax, assessment, charge, levy, account payable or claim if (i) the validity, applicability or amount thereof is being contested in good faith by appropriate actions or proceedings which will prevent the forfeiture or sale of any property of the Company, Borrower or such Subsidiary or any material interference with the use thereof by the Company, Borrower or such Subsidiary, and (ii) the Company, Borrower or such Subsidiary shall set aside on its books, reserves adequate in accordance with GAAP. The Company and Borrower will promptly comply and will cause each Subsidiary to comply with all laws, ordinances or governmental rules and regulations to which it is subject including, without limitation, the Occupational Safety and Health Act of 1970, as amended, ERISA and all laws, ordinances, governmental rules and regulations relating to environmental protection in all applicable jurisdictions, the violation of which could materially and adversely affect the properties, business, profits or condition of the Company and Borrower and its Subsidiaries or would result in any Lien not permitted under Section 5.10. 5.4 MAINTENANCE, ETC. The Company and Borrower will maintain, preserve and keep, and will cause each Restricted Subsidiary to maintain, preserve and keep, its properties which are used or useful in the conduct of its business (whether owned in fee or a leasehold interest) in good repair and working order and from time to time will make all necessary repairs, replacements, renewals and additions so that at all times the efficiency thereof shall be maintained. 5.5 NATURE OF BUSINESS. The Company, Borrower and each Restricted Subsidiary will continue to carry on substantially the same type of business currently carried on and activities which are ancillary, incidental or necessary to the ongoing business of the Company, Borrower and the Restricted Subsidiaries as presently conducted. 5.6 CONSOLIDATED NET WORTH. The Company will at all times keep and maintain Consolidated Net Worth at an amount not less than $200,000,000. 11 5.7 FIXED CHARGES COVERAGE RATIO. The Company will keep and maintain the ratio (determined as of the end of each fiscal quarter of the Company) of Net Income Available for Fixed Charges to Fixed Charges for the immediately preceding period of four consecutive fiscal quarters including the fiscal quarter ending on the calculation date (taken as a single accounting period) at not less than 2.0 to 1.0. 5.8 LEVERAGE RATIO. The Company will not at any time permit Consolidated Funded Debt to exceed 55% of Consolidated Total Capitalization. 5.9 ADDITIONAL LIMITATIONS ON DEBT. (a) The Company and the Borrower will not, and will not permit any Restricted Subsidiary to, create, assume or incur or in any manner become liable in respect of any Debt, except: (1) Funded Debt of the Company, Borrower and Restricted Subsidiaries permitted by Section 5.8; (2) Current Debt of the Company, Borrower or any Restricted Subsidiary, provided that during the twelve-month period immediately preceding the date of any determination hereunder, there shall have been a period of 30 consecutive days during which Current Debt of the Company and its Restricted Subsidiaries shall be an amount no greater than the amount of additional Funded Debt that could have been issued on each such day of said 30-day period within the limitations of Section 5.9(a)(1) above; (3) in addition to the limitations with respect to Debt pursuant to the foregoing paragraphs (1) and (2), in the case of Priority Debt, at the time of issuance of any such Priority Debt and after giving effect thereto and the application of the proceeds thereof, (x) the aggregate principal amount of Priority Debt shall not exceed an amount equal to 20% of Consolidated Net Worth and (y) all such Priority Debt shall have been incurred within the other applicable limitations of this Section 5.9(a); and (4) Debt of a Restricted Subsidiary owing to the Company or to a Wholly-owned Restricted Subsidiary. (b) Any corporation which becomes a Restricted Subsidiary after the date hereof shall for all purposes of this Section 5.9 be deemed to have created, assumed or incurred at the time it becomes a Restricted Subsidiary all Debt of such corporation existing immediately after it becomes a Restricted Subsidiary. 5.10 LIMITATION ON LIENS. The Company and Borrower will not, and will not permit any Restricted Subsidiary to, create or incur, or suffer to be incurred or to exist, any Lien on its or their property or assets, whether now owned or hereafter acquired, or upon any income or profits therefrom, or transfer any property for the purpose of subjecting the same to the payment of obligations in priority to the payment of its or their general creditors, or acquire or agree to acquire, or permit any Restricted Subsidiary to acquire, any property or assets upon conditional sales agreements or other title retention devices, except: (a) Liens for property taxes and assessments or governmental charges or levies and Liens securing claims or demands of mechanics and materialmen, provided payment thereof is not at the time required by Section 5.3; (b) Liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Company or a Restricted Subsidiary shall at any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have been secured; (c) Liens incidental to the conduct of business or the ownership of properties and assets (including Liens in connection with worker's compensation, unemployment insurance and other like laws, warehousemen's and attorneys' liens and statutory landlords' liens) and Liens to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other Liens of like general nature incurred in the ordinary course of business and not in connection with the borrowing of money; provided in each case, the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings; 12 (d) minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which are necessary for the conduct of the activities of the Company and its Restricted Subsidiaries or which customarily exist on properties of corporations engaged in similar activities and similarly situated and which do not in any event materially impair their use in the operation of the business of the Company and its Restricted Subsidiaries; (e) Liens securing Indebtedness of a Restricted Subsidiary to the Company or to another Wholly-owned Restricted Subsidiary; (f) Liens on shares of stock of Unrestricted Subsidiaries; (g) Liens existing as of January 1, 1998 and reflected on Exhibit 5.10 hereto. (h) Liens incurred after the Closing Date given to secure the payment of the purchase price incurred in connection with (and within twelve months of) the acquisition after the Closing Date of fixed assets useful and intended to be used in carrying on the business of the Company or a Restricted Subsidiary, including Liens existing on such fixed assets at the time of acquisition thereof or at the time of acquisition by the Company or a Restricted Subsidiary of any business entity then owning such fixed assets, whether or not such existing Liens were given to secure the payment of the purchase price of the fixed assets to which they attach so long as they were not incurred, extended or renewed in contemplation of such acquisition, provided that (i) the Lien shall attach solely to the fixed assets acquired or purchased, (ii) at the time of acquisition of such fixed assets, the aggregate amount remaining unpaid on all Indebtedness secured by Liens on such fixed assets whether or not assumed by the Company or a Restricted Subsidiary shall not exceed an amount equal to the lesser of the total purchase price or fair market value at the time of acquisition of such fixed assets (as determined in good faith by the Board of Directors of the Company), and (iii) all such Indebtedness shall have been incurred within the other applicable limitations of Section 5.8 and Section 5.9; and (i) Liens, in addition to those permitted by Section 5.10(a) through (h) above, securing Debt of the Company or any Restricted Subsidiary (including, without limitation, Liens securing obligations of the Company or any Restricted Subsidiary under any operating lines or short-term or revolving bank facilities); provided that after giving effect to the incurrence of all Debt secured by such Liens (i) the aggregate principal amount of Priority Debt shall not exceed an amount equal to 20% of Consolidated Net Worth and (ii) all such Debt shall have been incurred within the other applicable limitations of Section 5.8 and Section 5.9; 5.11 RESTRICTED PAYMENTS. The Company and Borrower will not, and will not permit any Restricted Subsidiary to, make any Restricted Investment or Restricted Payment, if, after giving effect thereto, the sum of (i) the aggregate amount of Restricted Payments made during the period from and after January 1, 1998 to and including the date of the making of the Restricted Payment in question, plus (ii) the aggregate amount of all Restricted Investments made by the Company or any Restricted Subsidiary during said period would exceed the sum of (x) $115,000,000 (Canadian) plus (y) 75% of Consolidated Net Income for such period, computed on a cumulative basis for said entire period (or if such Consolidated Net Income is a deficit figure for any fiscal period within such period, then minus 100% of such deficit) plus (z) an amount equal to the aggregate net cash proceeds received by the Company from the issuance or sale after the Closing Date (other than to the Company or any Subsidiary) of shares of common stock of the Company (such sum described in clauses (x), (y) and (z) being referred to as the "Available Pool"). In addition to the foregoing restrictions, the Company will not make any Restricted Payments or any Restricted Investment if, at the time thereof or after giving effect thereto, any Default or Event of Default shall exist. The Company will not declare any dividend which constitutes a Restricted Payment payable more than 60 days after the date of declaration thereof. For the purposes of this Section 5.11, the amount of any Restricted Payment declared, paid or distributed in property shall be deemed to be the greater of the book value or fair market value (as determined in good faith 13 by the Board of Directors of the Company) of such property at the time of the making of the Restricted Payment in question. In valuing any Restricted Investments for the purpose of applying the limitations set forth in this Section 5.11, such Restricted Investments shall be taken at the original cost thereof, without allowance for any subsequent write-offs or appreciation or depreciation therein, but less any amount repaid or recovered on account of capital or principal. For purposes of this Section 5.11, at any time when a corporation becomes a Restricted Subsidiary, all Restricted Investments of such corporation at such time shall be deemed to have been made by such corporation, as a Restricted Subsidiary, at such time. 5.12 MERGERS, CONSOLIDATIONS AND SALES OF ASSETS. (a) The Company and Borrower will not, and will not permit any Restricted Subsidiary to, (i) consolidate or amalgamate with or be a party to a merger with any other corporation or (ii) sell, lease or otherwise dispose of all or any substantial part (as defined in paragraph (d) of this Section 5.12) of Consolidated Assets; provided, however, that: (1) any Restricted Subsidiary may merge or amalgamate or consolidate with or into the Company or any Wholly-owned Restricted Subsidiary so long as in any merger or consolidation involving the Company, the Company shall be the surviving or continuing corporation; (2) the Company may consolidate or amalgamate or merge with any other corporation if (i) (x) in the case of any consolidation or merger, the purchasing, surviving or continuing corporation shall be the Company or (y) in the case of any amalgamation, the Company's existence shall continue with the amalgamation and all obligations hereunder and under the Note shall constitute obligations of the amalgamated entity and (ii) at the time of such amalgamation, consolidation or merger and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing; and (3) any Restricted Subsidiary may sell, lease or otherwise dispose of all or any substantial part of its assets to the Company or any Wholly-owned Restricted Subsidiary. (b) The Company will not permit any Restricted Subsidiary to issue or sell any shares of stock of any class (including as "stock" for the purposes of this Section 5.12, any warrants, rights or options to purchase or otherwise acquire stock or other Securities exchangeable for or convertible into stock) of such Restricted Subsidiary to any Person other than the Company or a Wholly-owned Restricted Subsidiary, except for the purpose of qualifying directors, or except in satisfaction of the validly pre-existing preemptive rights of minority shareholders in connection with the simultaneous issuance of stock to the Company and/or a Restricted Subsidiary whereby the Company and/or such Restricted Subsidiary maintain their same proportionate interest in such Restricted Subsidiary. (c) The Company will not sell, transfer or otherwise dispose of any shares of stock of any Restricted Subsidiary (except to qualify directors) and will not permit any Restricted Subsidiary to sell, transfer or otherwise dispose of (except to the Company or a Wholly-owned Restricted Subsidiary) any shares of stock of any other Restricted Subsidiary, unless: (1) simultaneously with such sale, transfer, or disposition, all shares of stock of such Restricted Subsidiary at the time owned by the Company and by every other Restricted Subsidiary shall be sold, transferred or disposed of as an entirety; and (2) such sale or other disposition does not involve a substantial part (as hereinafter defined) of the assets of the Company and its Restricted Subsidiaries. (d) As used in this Section 5.12, a sale, lease or other disposition of assets shall be deemed to be a "substantial part" of the assets of the Company and its Restricted Subsidiaries if the book value of such assets, when added to the book value of all other assets sold, leased or otherwise disposed of by the Company and its Restricted Subsidiaries (other than in the ordinary course of business) during the 12-month period ending with the date of such sale, lease or other disposition, exceeds 10% of Consolidated Assets, determined as of the end of the immediately preceding fiscal quarter. 14 For the purpose of making any determination of "substantial part," any sale, lease or other dispositions of assets of the Company and its Restricted Subsidiaries shall not be included if and to the extent the net proceeds are segregated from the general accounts of the Company and any Restricted Subsidiary, invested in Cash Equivalents until applied in accordance with clauses (1) or (2) below, and either (1) within one year after such sale, lease or other disposition, are used to acquire Like Assets, or (2) within one year after such sale, lease or disposition, are applied to the optional prepayment of Senior Funded Debt. Any such prepayment applied to the prepayment of the Notes shall be prepaid as and to the extent provided in Section 2.2 hereof. 5.13 TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any Restricted Subsidiary to, enter into or be a party to any transaction or arrangement with any Affiliate (including, without limitation, the purchase from, sale to or exchange of property with, or the rendering of any service by or for, any Affiliate), except in the ordinary course of and pursuant to the reasonable requirements of the Company's or such Restricted Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than would obtain in a comparable arm's-length transaction with a Person other than an Affiliate. 5.14 TERMINATION OF PENSION PLANS. The Company will not and will not permit any Subsidiary to withdraw from any Multiemployer Plan or permit any employee benefit plan maintained by it to be terminated if such withdrawal or termination could result in withdrawal liability (as described in Part 1 of Subtitle E of Title IV of ERISA) or the imposition of a Lien on any property of the Company or any Subsidiary pursuant to Section 4068 of ERISA. 5.15 DESIGNATION OF RESTRICTED SUBSIDIARIES. The Company may designate any Subsidiary a Restricted Subsidiary by giving written notice to Bank that the Board of Directors of the Company has made such designation, provided, however, no Subsidiary may be designated a Restricted Subsidiary unless, at the time of such designation and after giving effect thereto, no Default or Event of Default shall exist. Any such designation shall be irrevocable. 5.16 REPORTS AND RIGHTS OF INSPECTION. The Company will keep, and will cause each Restricted Subsidiary to keep, proper books of record and account in which full and correct entries will be made of all dealings or transactions of, or in relation to, the business and affairs of the Company or such Restricted Subsidiary, in accordance with GAAP consistently applied (except for changes disclosed in the financial statements furnished to you pursuant to this Section 5.17 and concurred in by the independent public accountants referred to in Section 5.17(b) hereof), and will furnish to you so long as you are the holder of any Note and to each other holder of the then outstanding Notes (in duplicate if so specified below or otherwise requested): (a) QUARTERLY STATEMENTS. As soon as available and in any event within 75 days after the end of each quarterly fiscal period (except the last) of each fiscal year, copies of: (1) consolidated balance sheets of the Company and its consolidated Subsidiaries (and, if different, of the Restricted Group) as of the close of such quarterly fiscal period, setting forth in comparative form the consolidated figures for the corresponding period of the fiscal year then most recently ended, (2) consolidated statements of earnings and retained earnings of the Company and its consolidated Subsidiaries (and, if different, of the Restricted Group) for such quarterly fiscal period and for the portion of the fiscal year ending with such quarterly fiscal period, in each case setting forth in comparative form the consolidated figures for the corresponding periods of the preceding fiscal year, and (3) consolidated statements of changes in cash resources of the Company and its consolidated Subsidiaries (and, if different, of the Restricted Group) for the portion of the fiscal year ending with such quarterly fiscal period, setting forth in comparative form the consolidated figures for the corresponding period of the preceding fiscal year, all in reasonable detail and certified as complete and correct by an authorized financial officer of the Company; 15 (b) ANNUAL STATEMENTS. As soon as available and in any event within 140 days after the close of each fiscal year of the Company, copies of: (1) consolidated and consolidating balance sheets of the Company and its consolidated Subsidiaries (and, if different, of the Restricted Group) as of the close of such fiscal year, and (2) consolidated and consolidating statements of earnings and retained earnings and changes in cash resources of the Company and its consolidated Subsidiaries (and, if different, of the Restricted Group) for such fiscal year, in each case setting forth in comparative form the consolidated and consolidating figures for the preceding fiscal year, all in reasonable detail and with regard to the consolidated figures, accompanied by a report thereon of a firm of independent public accountants of recognized national standing in the United States or Canada selected by the Company to the effect that the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company and its consolidated Subsidiaries (and, if different, of the Restricted Group) as of the end of the fiscal year being reported on and the consolidated results of the operations and cash flows for said year in conformity with GAAP and that the examination of such accountants in connection with such financial statements has been conducted in accordance with generally accepted auditing standards and included such tests of the accounting records and such other auditing procedures as said accountants deemed necessary in the circumstances; (c) AUDIT REPORTS. Promptly upon receipt thereof, one copy of each interim or special audit made by independent accountants of the books of the Company or any Restricted Subsidiary; (d) GOVERNMENTAL AND OTHER REPORTS. Promptly upon their becoming available, one copy of each financial statement, report, notice or proxy statement sent by the Company to stockholders generally and of each regular or periodic report, and any registration statement or prospectus filed by the Company or any Subsidiary with any securities exchange or any governmental regulatory body including, but without limitation, the Companies Form 20F and unaudited quarterly reports, and copies of any orders in any proceedings to which the Company or any of its Subsidiaries is a party, issued by any governmental agency having jurisdiction over the Company or any of its Subsidiaries; (e) ERISA REPORTS. Promptly upon the occurrence thereof, written notice of (i) a Reportable Event with respect to any Plan; (ii) the institution of any steps by the Company, any ERISA Affiliate, the PBGC or any other person to terminate any Plan; (iii) the institution of any steps by the Company or any ERISA Affiliate to withdraw from any Plan; (iv) a non-exempt "prohibited transaction" within the meaning of Section 406 of ERISA in connection with any Plan; (v) any material increase in the contingent liability of the Company or any Subsidiary with respect to any post-retirement welfare liability; or (vi) the taking of any action by, or the threatening of the taking of any action by, the Internal Revenue Service, the Department of Labor or the PBGC with respect to any of the foregoing; (f) OFFICER'S CERTIFICATES. Within the periods provided in paragraphs (a) and (b) above, a certificate of an authorized financial officer of the Company stating that such officer has reviewed the provisions of this Agreement and setting forth: (i) the information and computations (in sufficient detail) required in order to establish whether the Company was in compliance with the requirements of Section 5.6 through Section 5.12 at the end of the period covered by the financial statements then being furnished, and (ii) whether there existed as of the date of such financial statements and whether, to the best of such officer's knowledge, there exists on the date of the certificate or existed at any time during the period covered by such financial statements any Default or Event of Default (including, without limitation, with respect to Section 5.2) and, if any such condition or event exists on the date of the certificate, specifying the nature and period of existence thereof and the action the Company is taking and proposes to take with respect thereto; (g) ACCOUNTANT'S CERTIFICATES. Within the period provided in paragraph (b) above, a certificate of the accountants who render an opinion with respect to such financial statements, stating that they have reviewed this Agreement and stating further whether, in making their audit, such accountants have become aware of any Default or Event of Default under any of the terms or provisions of this Agreement insofar as 16 any such terms or provisions pertain to or involve accounting matters or determinations, and if any such condition or event then exists, specifying the nature and period of existence thereof; (h) UNRESTRICTED SUBSIDIARIES. Within the respective periods provided in paragraphs (a) and (b) above, financial statements of the character and for the dates and periods as in said paragraphs (a) and (b) provided covering each Unrestricted Subsidiary (or groups of Unrestricted Subsidiaries on a consolidated basis); (i) FORECASTS AND BUDGET. Within sixty (60) days following the end of each fiscal year of Company, the Consolidated pre-tax operating forecast and Consolidated capital expenditures budget of Company; and (j) REQUESTED INFORMATION. With reasonable promptness, such other data and information as you or any such holder may reasonably request. Without limiting the foregoing, the Company will permit Bank, to visit and inspect, any of the properties of the Company, Borrower and any Restricted Subsidiary, to examine all of their books of account, records, reports and other papers, to make copies and extracts therefrom and to discuss their respective affairs, finances and accounts with their respective officers, employees, and independent public accountants (and by this provision the Company authorizes said accountants to discuss with you the finances and affairs of the Company and its Restricted Subsidiaries) all at such reasonable times and as often as may be reasonably requested. 5.17 FURTHER ASSURANCE. The Borrower shall, at its cost and expense, upon request of the Bank, duly execute and deliver to the Bank such further instruments and do and cause to be done such further acts as may be necessary or proper in the reasonable opinion of the Bank to carry out more effectively the provisions and purposes of this Agreements. 5.18 PERFORMANCE OF OBLIGATIONS. The Borrower shall perform all obligations in accordance with usual and customary business terms, except to the extent that the non-fulfillment of same would not reasonably be expected to result in a Material Adverse Change, considered on a Consolidated basis, and except where the same are being contested in good faith, if the outcome of such contestation, if decided adversely to the Company or the Restricted Subsidiaries, would not reasonably be expected to result in a Material Adverse Change, considered on a Consolidated basis. Notwithstanding the foregoing contained in this Section it shall punctually pay all amounts due or to become due under this Agreement. ARTICLE 6 DEFAULTS AND REMEDIES 6.1 EVENTS OF DEFAULT. If any of the "Events of Default" (as defined in the Note) shall occur, then and in any such event, and at any time thereafter, if such or any other Event of Default shall then be continuing, the Bank may, at its option, declare the Notes to be due and payable, whereupon the maturity of the then unpaid balance of the Note shall be accelerated and the same, and all interest accrued thereon, shall forthwith become due and payable without presentment, demand, protest, or notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Note to the contrary notwithstanding, provided, however, upon the occurrence of an Event of Default of the type described in clause (d) of the definition of Events of Default in the Note, the Bank's commitment to lend shall automatically terminate and all of the principal, interest and other amounts payable hereunder, hereunder and under the Note and in connection with any outstanding Letter of Credit shall be automatically due and payable without notice or demand. In addition to the foregoing, upon any demand therefore made by Bank during the existence of any Event of Default, Borrower and Company hereby agree to deposit and pledge to bank, cash collateral in an amount not less than the aggregate face amount of all Letters of Credit which are outstanding as of the date of such demand. 6.2 SUITS FOR ENFORCEMENT. In case any one or more Events of Default shall occur and be continuing, the Bank may proceed to protect and enforce its rights or remedies either by suit in equity or by action at law, or both, whether for the specific performance of any covenant, agreement, or other provision contained herein, in the Note or in any document or instrument delivered in connection with or pursuant to this Agreement, or to 17 enforce the payment of the Note and Borrower's and Company's other obligations hereunder or any other legal or equitable right or remedy. The Borrower and Company expressly agree: (i) That the Courts of the State of Michigan and the United States District Court for the Eastern District of Michigan, shall be the exclusive forums for the adjudication of any enforcement action or dispute arising under this Agreement and/or the Notes. (ii) That it is subject to the personal jurisdiction of the Courts of the State of Michigan in connection with any enforcement action or dispute arising under this agreement. (iii) That service of any summons and complaint made by certified mail to the then address of the Borrower with copies to the Borrower's counsel, shall be deemed good and sufficient service. 6.3 RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein conferred upon the Bank is intended to be exclusive of any other right or remedy contained herein, in the Note or in any instrument or document delivered in connection with or pursuant to this Agreement, and every such right or remedy shall be cumulative and shall be in addition to every other such right or remedy contained herein and therein or now or hereafter existing at law or in equity or by statute, or otherwise. 6.4 RIGHTS AND REMEDIES NOT WAIVED. No course of dealing between the Borrower and the Bank or any failure or delay on the part of the Bank in exercising any rights or remedies hereunder shall operate as a waiver of any rights or remedies of the Bank and no single or partial exercise of any rights or remedies hereunder shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder. ARTICLE 7 DEFINITIONS 7.1 The following words and expressions, when used in this Agreement, unless the contrary is stipulated, have the following meaning: "AFFILIATE" means any Person (other than a Restricted Subsidiary) (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Company, (ii) which beneficially owns or holds 5% or more of any class of the Voting Stock of the Company or (iii) 5% or more of the Voting Stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) of which is beneficially owned or held by the Company or a Subsidiary. The term "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of Voting Stock, by contract or otherwise; "CAPITALIZED LEASE" shall mean any lease (i) the obligation for Rentals with respect to which is required to be capitalized on a consolidated balance sheet of the lessee and its subsidiaries in accordance with GAAP or (ii) for which the amount of the asset and liability thereunder as if so capitalized should be disclosed in a note to such balance sheet. "CAPITALIZED RENTALS" of any Person means as of the date of any determination thereof the amount at which the aggregate Rentals due and to become due under all Capitalized Leases under which such Person is a lessee would be reflected as a liability on a consolidated balance sheet of such Person. "CASH EQUIVALENTS" means, as of the date of any determination thereof, Investments of the type described in clauses (ii), (iii) and (iv) of the definition of the term "Restricted Investments". "CLOSING DATE" shall mean the date on which the conditions described in Section 4.1 hereof are satisfied. "COMMITMENT AMOUNT" means Sixty Million Dollars ($60,000,000). "CONSOLIDATED" means produced by aggregating the relevant financial statements or accounts of the Subsidiaries (or other Persons which, in accordance with GAAP, are to be included in such computation) of a Person on a line-by-line basis (i.e.: adding together corresponding items of assets, liabilities, revenues and expenses) with the relevant financial statements or accounts of such Person, eliminating inter-company balances and transactions and providing for any Minority Interests, all as determined in accordance with GAAP; for greater certainty, the Consolidated ratios contemplated by Section 5.14 with respect to the 18 Company shall include its Restricted Subsidiaries as well as all Unrestricted Subsidiaries the Debt of which is guaranteed by the Company; "CONSOLIDATED" when used as a prefix to any item shall mean the aggregate amount of all such item of the Company and its Restricted Subsidiaries on a consolidated basis eliminating intercompany items in accordance with GAAP. "CONSOLIDATED ASSETS" shall mean, as of the date of any determination thereof, consolidated total assets of the Company and its Restricted Subsidiaries determined in accordance with GAAP (excluding, in any event, assets or equity attributable to Unrestricted Subsidiaries). "CONSOLIDATED CURRENT LIABILITIES" shall mean as of the date of any determination thereof such liabilities of the Company and its Restricted Subsidiaries on a consolidated basis as shall be determined in accordance with GAAP to constitute current liabilities (excluding, in any event, liabilities attributable to Unrestricted Subsidiaries). "CONSOLIDATED NET INCOME" for any period shall mean the gross revenues of the Company and its Restricted Subsidiaries for such period less all expenses and other proper charges (including taxes on income), determined on a consolidated basis after eliminating earnings or losses attributable to outstanding Minority Interests, but excluding in any event: (a) any gains or losses (i) on the sale or other disposition of Investments or fixed or capital assets, and any taxes on such excluded gains and any tax deductions or credits on account of any such excluded losses or (ii) attributable to any non-recurring or extraordinary items including, without limitation, any discontinuance of operations; (b) the proceeds of any life insurance policy; (c) net earnings and losses of any Restricted Subsidiary accrued prior to the date it became a Restricted Subsidiary; (d) net earnings and losses of any corporation (other than a Restricted Subsidiary), substantially all the assets of which have been acquired in any manner by the Company or any Restricted Subsidiary, realized by such corporation prior to the date of such acquisition; (e) net earnings and losses of any corporation (other than a Restricted Subsidiary) with which the Company or a Restricted Subsidiary shall have consolidated or which shall have merged into or with the Company or a Restricted Subsidiary prior to the date of such consolidation or merger; (f) net earnings of any business entity (other than a Restricted Subsidiary) in which the Company or any Restricted Subsidiary has an ownership interest unless such net earnings shall have actually been received by the Company or such Restricted Subsidiary in the form of cash distributions; (g) any portion of the net earnings of any Restricted Subsidiary which for any reason is unavailable for payment of dividends to the Company or any other Restricted Subsidiary; (h) earnings resulting from any reappraisal, revaluation or write-up of assets; (i) any deferred or other credit representing any excess of the equity in any Subsidiary at the date of acquisition thereof over the amount invested in such Subsidiary; (j) any gain arising from the acquisition of any Securities of the Company or any Restricted Subsidiary; and (k) any reversal of any contingency reserve, except to the extent that provision for such contingency reserve shall have been made from income arising during such period. "CONSOLIDATED NET WORTH" shall mean, as of the date of any determination thereof, the consolidated total shareholders equity of the Company and its Restricted Subsidiaries, determined in accordance with GAAP. 19 "CONSOLIDATED TOTAL CAPITALIZATION" shall mean, as of the date of any determination thereof, the sum of (i) the aggregate principal amount of Consolidated Funded Debt then outstanding plus (ii) Consolidated Net Worth. "CURRENT DEBT" of any Person shall mean as of the date of any determination thereof all Debt of such Person other than Funded Debt of such Person. "DEBT" of any Person shall mean, as of the date of any determination thereof (without duplication): (i) all Indebtedness for borrowed money or evidenced by notes, bonds, debentures or similar evidences of Indebtedness of such Person; (ii) obligations secured by any Lien upon property owned by such Person or created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, notwithstanding the fact that the rights and remedies of the seller, lender or lessor under any such arrangement in the event of default are limited to repossession or sale of property including, without limitation, obligations secured by Liens arising from the sale or transfer of notes or accounts receivable, but, in all events, excluding trade payables and accrued expenses constituting Consolidated Current Liabilities: (iii) Capitalized Rentals; (iv) reimbursement obligations in respect of credit enhancement instruments including letters of credit (excluding, however, short-term letters of credit and surety bonds issued in commercial transactions in the ordinary course of business); and (v) (without duplication of any of the foregoing) Guaranties of obligations of others of the character referred to hereinabove in this definition. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed to also refer to any successor sections. "ERISA AFFILIATE" shall mean any corporation, trade or business that is, along with the Company, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in section 414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA. "EVENT OF DEFAULT" shall have the meaning given it in the Note. "FIXED CHARGES" for any period shall mean on a consolidated basis the sum of (i) all Rentals (other than Rentals on Capitalized Leases) payable during such period by the Company and its Restricted Subsidiaries, and (ii) all Interest Charges on all Indebtedness (including the interest component of Rentals on Capitalized Leases) of the Company and its Restricted Subsidiaries. "FUNDED DEBT" of any Person shall mean all Debt of such Person having a final maturity of one or more than one year from the date of origin thereof (or which is renewable or extendible at the option of the obligor for a period or periods of one or more than one year from the date of origin), including all payments in respect thereof that are required to be made within one year from the date of any determination of Funded Debt, whether or not the obligation to make such payments shall constitute a current liability of the obligor under GAAP. "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" means the generally accepted accounting principles acknowledged by the Canadian Institute of Chartered Accountants and published in the Canadian Institute of Chartered Accountants' Handbook; "GUARANTIES" by any Person shall mean all obligations (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing, or in effect guaranteeing, any Indebtedness, dividend or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, all obligations incurred through an agreement, contingent or otherwise, by such Person: (i) to purchase such Indebtedness or obligation or any property or assets constituting security therefor, (ii) to advance or supply funds (x) for the purchase or 20 payment of such Indebtedness or obligation, or (y) to maintain working capital or other balance sheet condition or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation, (iii) to lease property or to purchase Securities or other property or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of the primary obligor to make payment of the Indebtedness or obligation, or (iv) otherwise to assure the owner of the Indebtedness or obligation of the primary obligor against loss in respect thereof. For the purposes of all computations made under this Agreement, a Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be Indebtedness equal to the principal amount of such Indebtedness for borrowed money which has been guaranteed, and a Guaranty in respect of any other obligation or liability or any dividend shall be deemed to be Indebtedness equal to the maximum aggregate amount of such obligation, liability or dividend. "INDEBTEDNESS" of any Person shall mean and include all obligations of such Person which in accordance with GAAP shall be classified upon a balance sheet of such Person as liabilities of such Person, and in any event shall include all (i) obligations of such Person for borrowed money or which has been incurred in connection with the acquisition of property or assets, (ii) obligations secured by any Lien upon property or assets owned by such Person, even though such Person has not assumed or become liable for the payment of such obligations, (iii) obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, notwithstanding the fact that the rights and remedies of the seller, lender or lessor under such agreement in the event of default are limited to repossession or sale of property, (iv) Capitalized Rentals and (v) Guaranties of obligations of others of the character referred to in this definition. "INTEREST CHARGES" for any period shall mean all interest and all amortization of debt discount and expense on any particular Indebtedness for which such calculations are being made. Computations of Interest Charges on a pro forma basis for Indebtedness having a variable interest rate shall be calculated at the rate in effect on the date of any determination. "INTERTAPE POLYMER CORP." shall mean Intertape Polymer Corp., a Virginia corporation, and any Person who succeeds to all, or substantially all, of the assets and business of Intertape Polymer Corp. "INVESTMENTS" shall mean all investments, in cash or by delivery of property made, directly or indirectly in any Person, whether by acquisition of shares of capital stock, indebtedness or other obligations or Securities or by loan, advance, capital contribution or otherwise; provided, however, that "Investments" shall not mean or include routine investments in property to be used or consumed in the ordinary course of business. "LIEN" shall mean any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute or contract, and including but not limited to the security interest lien arising from a mortgage, encumbrance, pledge, Capitalized Lease, conditional sale or trust receipt or a lease in which such Person is lessor, consignment or bailment for security purposes. The term "Lien" shall include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances (including, with respect to stock, stockholder agreements, voting trust agreements, buy-back agreements and all similar arrangements) affecting property. For the purposes of this Agreement, the Company or a Restricted Subsidiary shall be deemed to be the owner of any property which it has acquired or holds subject to a conditional sale agreement, Capitalized Lease or other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes and such retention or vesting shall constitute a Lien. "LIKE ASSETS" shall mean, as of the date of any determination thereof, capital assets, used or to be used by the Company or any Restricted Subsidiary in the lines of business in which the Company or such Restricted Subsidiary is engaged as of the Closing Date or in businesses reasonably related thereto. "LONG-TERM LEASE" shall mean any lease of real or personal property (other than a Capitalized Lease) having an original term, including any period for which the lease may be renewed or extended at the option of the lessor, of more than three years. 21 "MATERIAL ADVERSE CHANGE" means a material adverse change in the business, assets, liabilities, financial position, operating results or business prospects of the Company or any of the Restricted Subsidiaries, or in the ability of the Borrower or the Company to perform any of its obligations under this Agreement or under the Guarantee. "MATURITY DATE" means April 1, 2000. "MATERIAL DEBT" shall mean any Debt which has or relates to, in the aggregate, an unpaid principal amount (or aggregate liability) of more than U.S. $15,000,000 or an equivalent amount of money in any other currency. "MINORITY INTERESTS" shall mean any shares of stock of any class of a Restricted Subsidiary (other than directors qualifying shares as required by law) that are not owned by the Company and/or one or more of its Restricted Subsidiaries. Minority Interests shall be valued by valuing Minority Interests constituting preferred stock at the voluntary or involuntary liquidating value of such preferred stock, whichever is greater, and by valuing Minority Interests constituting common stock at the book value of capital and surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such common stock required by the foregoing method of valuing Minority Interests in preferred stock. "MULTIEMPLOYER PLAN" shall have the same meaning as in ERISA. "NET INCOME AVAILABLE FOR FIXED CHARGES" for any period shall mean the sum of (i) Consolidated Net Income during such period plus (to the extent deducted in determining Consolidated Net Income), (ii) all provisions for any Federal, state or other income taxes made by the Company and its Restricted Subsidiaries during such period, (iii) Fixed Charges of the Company and its Restricted Subsidiaries during such period and (iv) all amortization expenses. "NEW SUBSIDIARY" means a direct or indirect Subsidiary of IPG (US) Inc. that is incorporated, created or acquired after the date hereof as well as any existing Subsidiary of IPG (US) Inc. that is not currently a Subborrower under the Subfacility Note. "NOTE AGREEMENT" means the agreement(s) entered into by the Company dated as of July 1, 1999, with respect to the issuance and sale of two series of senior notes in an aggregate principal amount of US $137,000,000; "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "PERSON" shall mean an individual, partnership, corporation, trust or unincorporated organization, and a government or agency or political subdivision thereof. "PLAN" means a "PENSION PLAN," as such term is defined in ERISA, established or maintained by the Company or any ERISA Affiliate or as to which the Company or any ERISA Affiliate contributed or is a member or otherwise may have any liability. "PRIORITY DEBT" shall have the meaning set forth in the Note Agreement. "RENTALS" shall mean and include as of the date of any determination thereof all fixed payments (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by the Company or a Restricted Subsidiary, as lessee or sublessee under a lease of real or personal property, but shall be exclusive of any amounts required to be paid by the Company or a Restricted Subsidiary (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under any so-called "percentage leases" shall be computed solely on the basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross revenues. "REPORTABLE EVENT" shall have the same meaning as in ERISA. "RESPONSIBLE OFFICER" shall mean any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this Agreement. 22 "RESTRICTED GROUP" shall mean, as of the date of determination thereof, the Company and its Restricted Subsidiaries. "RESTRICTED INVESTMENTS" shall mean all Investments, other than: (a) Investments by the Company and its Restricted Subsidiaries in and to Restricted Subsidiaries, including, without limitation, Investments (i) directly out of the cash proceeds to the Company of the concurrent sale of shares of capital stock of the Company or (ii) pursuant to a direct share exchange offer by the Company, and including any Investment in a corporation which, after giving effect to such Investment, will become a Restricted Subsidiary; (b) Investments in commercial paper maturing in 270 days or less from the date of issuance which, at the time of acquisition by the Company or any Restricted Subsidiary, is accorded a rating of at least A-2 by Standard & Poor's Corporation or at least Prime-2 by Moody's Investors Service, Inc.; (c) Investments in (i) direct obligations of the United States of America or any agency or instrumentality of the United States of America, the payment or guarantee of which constitutes a full faith and credit obligation of the United States of America or (ii) direct obligations of Canada or any agency or instrumentality of Canada, the payment or guarantee of which constitutes a full faith and credit obligation of Canada, in either case, maturing in twelve months or less from the date of acquisition thereof; (d) Investments in certificates of deposit maturing within one year from the date of issuance thereof, issued by a bank or trust company organized under the laws of the United States, any state thereof or Canada or any province thereof, having capital, surplus and undivided profits aggregating at least U.S. $100,000,000 (or its equivalent in Canadian currency) and whose long-term certificates of deposit are, at the time of acquisition thereof by the Company or a Restricted Subsidiary, rated A- or better by Standard & Poor's Corporation or A3 or better by Moody's Investors Service, Inc. or Investments in Eurodollar Certificates of deposit maturing within one year after the acquisition thereof and issued by a bank in western Europe or England having capital, surplus and undivided profits of at least U.S. $1,000,000,000 (or its equivalent in such country's local currency); and (e) loans or advances (including, without limitation, loans or advances to employees of the Company for the purchase by such employee of shares of stock of the Company by such employee) in the usual and ordinary course of business to officers, directors and employees for expenses (including moving expenses related to a transfer) incidental to carrying on the business of the Company or any Restricted Subsidiary provided that the aggregate amount of all such loans or advances shall at no time exceed U.S. $1,000,000. "RESTRICTED PAYMENTS" shall mean, for any period, (i) the declaration or payment, directly or indirectly, of any dividend either in cash or property, on any shares of capital stock of the Company or any Restricted Subsidiary; (ii) the purchase, redemption or retirement, directly or indirectly, of any shares of capital stock of any class or of any warrants, rights or options to purchase or acquire any shares of capital stock of the Company or any Restricted Subsidiary; and (iii) any payment or distribution, directly or indirectly, by the Company or a Restricted Subsidiary in respect of its capital stock; provided, however, that "Restricted Payments" shall not include any such dividends, purchases, redemptions, retirements or other distribution by a Restricted Subsidiary to the Company or to a Wholly-owned Restricted Subsidiary. "RESTRICTED SUBSIDIARY" shall mean and include Intertape Polymer Corp., Polymer International Corp., Intertape Polymer Inc., any other Subsidiary so described in Exhibit C hereto and any other Subsidiary (i) which is organized under the laws of the United States, Puerto Rico, Canada or any Qualifying EU Jurisdiction or any jurisdiction thereof; (ii) which conducts substantially all of its business and has substantially all of its assets within the United States, Puerto Rico, Canada or any Qualifying EU 23 Jurisdiction; (iii) of which more than 80% (by number of votes) of the Voting Stock is beneficially owned by the Company or any Wholly-owned Restricted Subsidiary, and (iv) which has been designated by the Board of Directors of the Company as a Restricted Subsidiary in accordance with Section 5.16. "SECURITY" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended. "SENIOR FINANCIAL OFFICER" means the chief financial officer, principal accounting officer, treasurer or comptroller of the Company. "SENIOR FUNDED DEBT" shall mean Consolidated Funded Debt, other than Subordinated Funded Debt. "SUBBORROWERS" shall mean American Tape Co., Intertape Polymer Corp., Anchor Continental, Inc., Central Products Company and any New Subsidiary that becomes a borrower under the Subfacility Note in accordance with the terms of Section 8.9 below. "SUBFACILITY NOTE" shall mean the Eurodollar Revolving Note made by the Subborrowers (other than any New Subsidiary) to the order of the Bank as of the date hereof in the face amount of Fifteen Million Dollars ($15,000,000) and any extensions, renewals or replacements thereof or amendments thereto. "SUBSIDIARY" shall mean shall mean any corporation, association or other business entity (whether now existing or hereafter organized or acquired) in which more than fifty percent (50%) of the outstanding ownership interests having ordinary voting power for the election of directors and the exercise the general direction and supervision of such entity, as of any applicable date of determination, shall be owned directly, or indirectly through one or more Subsidiaries, by Borrower. "UNRESTRICTED SUBSIDIARY" shall mean any Subsidiary which is not a Restricted Subsidiary. "VOTING STOCK" shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors (or Persons performing similar functions). "WHOLLY-OWNED" when used in connection with any Subsidiary shall mean a Subsidiary of which all of the issued and outstanding shares of stock (except shares required as directors' qualifying shares) shall be owned by the Company and/or one or more of its Wholly-owned Restricted Subsidiaries. 24 ARTICLE 8 MISCELLANEOUS 8.1 NOTICE AND COMMUNICATIONS. All communications and notices provided for the parties hereunder shall be in writing and mailed by certified mail, return receipt requested or delivered to: (a) The Borrower and the Company: Intertape Polymer Group Inc. 110E Montee de Liesse St. Laurent, Quebec H4T 1N4 Canada (b) The Bank: Comerica Bank 500 Woodward Avenue Detroit, MI 48226 Attn: Darlene Persons International Banking
or to such other address as shall be designated by the parties in a written notice to the other, complying as to delivery with the terms of this Agreement. 8.2 INCONSISTENCY. Whenever the provisions of the Note are inconsistent with any of the provisions of the Agreement herein, the provisions of the Note shall be deemed to control. 8.3 EXPENSES. The Borrower agrees to pay all costs, expenses as well as any and all stamp and other taxes payable or determined to be payable in connection with the preparation, execution and delivery of this Agreement, the Note and related documents (collectively, the "Documents"), including reasonable attorney's fees and disbursements. 8.4 CONSTRUCTION. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted principles of good accounting practice and consistently applied. 8.5 ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or transfer its rights hereunder without the prior written consent of the Bank. 8.6 HEADINGS. Article headings used in this Agreement are for convenience only and shall not affect the construction or interpretation of this Agreement. 8.7 LAW GOVERNING AGREEMENT. The validity, performance, interpretation and other incidents of this Agreement shall be governed by the internal laws of the State of Michigan. 8.8 MODIFICATIONS. This Agreement may not be modified in any way without a writing duly executed by all parties hereto. 8.9 NEW SUBSIDIARY BORROWINGS. A New Subsidiary shall become a Subborrower (as if it had executed and delivered the Subfacility Note) upon the delivery of the following to the Bank, in form and substance satisfactory to the Bank: (i) certified true and complete copies of the organizational documents (such as articles of incorporation, articles or organization, certificate of limited partnership, bylaws, operating agreement, partnership agreement, etc.) of the New Subsidiary; (ii) opinion letter(s) from the legal counsel for the New Subsidiary covering such matters as the Bank shall require; (iii) a duly executed and authorized joinder certificate in the form of Exhibit D attached hereto; (iv) if the resolutions of any guarantor of the Subfacility Note delivered in connection with this Agreement authorizing the delivery of such guaranty do not include the adding of a New Subsidiary as a Subborrower, then an acknowledgement by such guarantor to the addition of such new Subborrower under such guaranty; and (v) such other items as are reasonably requested by the Bank in connection with the foregoing. [SIGNATURES ON THE FOLLOWING PAGE] 25 IN WITNESS WHEREOF, the undersigned has hereunto set his hand and with respect to the Borrower, its seal the day and year first above written, intending and declaring this to be a duly sealed instrument. IPG HOLDINGS LP By: Intertape Polymer Inc. Its General Partner By:/s/ANDREW M. ARCHIBALD Name: Andrew M. Archibald Title: Chief Financial Officer, Secretary IPG (US) INC. By: /s/JOSEPH D. BRUNO Name: Joseph D. Bruno Title: VP Sales -- Distribution Products INTERTAPE POLYMER GROUP INC. By: /s/ANDREW M. ARCHIBALD Name: Andrew M. Archibald Title: Chef Financial Officer, VP Administration By: /s/SAL VITALE Name: Sal Vitale Title: V.P. Finance COMERICA BANK By: /s/DARLENE PERSONS Name: Darlene Persons Title: Vice President
26 EX-2.2 6 EXHIBIT 2.2 EXHIBIT 2.2 STOCK PURCHASE AGREEMENT BY AND BETWEEN SPINNAKER INDUSTRIES, INC. AND INTERTAPE POLYMER GROUP INC. DATED AS OF APRIL 9, 1999 27 TABLE OF CONTENTS
PAGE -------- ARTICLE I -- PURCHASE AND SALE OF COMPANY SHARES....................... 30 1.1 Sale of Company Shares by Seller............................ 30 1.2 Time and Place of Closing................................... 30 ARTICLE II -- PURCHASE PRICE........................................... 31 2.1 Purchase Price.............................................. 31 ARTICLE III -- SELLER REPRESENTATIONS AND WARRANTIES................... 31 3.1 Organization; Title to Company Shares....................... 31 3.2 Certificate of Incorporation and Bylaws..................... 31 3.3 Authority................................................... 31 3.4 No Conflict; Required Filings and Consents.................. 32 3.5 Absence of Litigation....................................... 32 3.6 Brokers..................................................... 32 3.7 Disclosure.................................................. 32 ARTICLE IV -- COMPANY REPRESENTATIONS AND WARRANTIES................... 33 4.1 Organization; Approvals..................................... 33 4.2 Capital Stock............................................... 33 4.3 Certificate of Incorporation and Bylaws..................... 33 4.4 No Conflict; Required Filings and Consents.................. 33 4.5 Compliance; Permits......................................... 34 4.6 Inventory................................................... 34 4.7 Accounts Receivable......................................... 34 4.8 Financial Statements........................................ 34 4.9 Absence of Certain Changes or Events........................ 34 4.10 Absence of Litigation....................................... 35 4.11 Employee Benefit Plans...................................... 35 4.12 Labor and Employment Matters................................ 36 4.13 Tangible Personal Property.................................. 37 4.14 Environmental Matters....................................... 37 4.15 Absence of Agreements....................................... 38 4.16 Taxes....................................................... 38 4.17 Insurance................................................... 39 4.18 Material Contracts.......................................... 39 4.19 Substantial Customers and Suppliers......................... 39 4.20 Intellectual Property....................................... 39 4.21 Year 2000 Representation.................................... 41 4.22 Real Property............................................... 41 4.23 Disclosure.................................................. 41 4.24 Subsidiaries................................................ 41 4.25 Material Adverse Effect..................................... 41 ARTICLE V -- BUYER REPRESENTATIONS AND WARRANTIES...................... 42 5.1 Organization; Approvals..................................... 42 5.2 Authority................................................... 42 5.3 No Conflict; Required Filings and Consents.................. 42 5.4 Absence of Litigation....................................... 42 5.5 Brokers..................................................... 43 5.6 Disclosure.................................................. 43 5.7 Holding of Company Shares................................... 43
28
PAGE -------- ARTICLE VI -- CERTAIN COVENANTS........................................ 43 6.1 Affirmative Covenants....................................... 43 6.2 Negative Covenants.......................................... 44 6.3 Exclusivity................................................. 45 6.4 Access and Information...................................... 45 6.5 Update Disclosure; Breaches................................. 46 6.6 Expenses.................................................... 46 6.7 Retention of Records........................................ 46 ARTICLE VII -- ADDITIONAL AGREEMENTS................................... 46 7.1 Appropriate Action; Consents; Filings....................... 46 7.2 Employee Benefit Matters.................................... 47 7.3 Notification of Certain Matters............................. 48 7.4 Public Announcements........................................ 48 7.5 Customer Retention.......................................... 48 7.6 Non-Competition............................................. 48 7.7 Further Transfer Matters.................................... 49 ARTICLE VIII -- TAXES.................................................. 50 8.1 Tax Indemnification......................................... 50 8.2 Preparation and Filing of Tax Returns....................... 50 8.3 Tax Contests................................................ 51 8.4 Cooperation................................................. 52 8.5 Termination of Tax Sharing Agreements....................... 52 8.6 FIRPTA Certificates......................................... 53 8.7 Conflict.................................................... 53 8.8 Survival.................................................... 53 ARTICLE IX -- CONDITIONS OF CLOSING.................................... 53 9.1 Conditions to Obligations of Each Party..................... 53 9.2 Additional Conditions to Obligations of Buyer............... 53 9.3 Additional Conditions to Obligations of the Seller.......... 54 ARTICLE X -- TERMINATION, AMENDMENT AND WAIVER......................... 55 10.1 Termination................................................. 55 10.2 Effect of Termination; Put Right............................ 55 10.3 Waiver...................................................... 56 ARTICLE XI -- NDEMNIFICATION........................................... 56 11.1 Indemnification............................................. 56 11.2 Procedures for Indemnification.............................. 56 ARTICLE XII -- GENERAL PROVISIONS...................................... 57 Survival of Representations, Warranties, Covenants and 12.1 Agreements.................................................. 57 12.2 Notices..................................................... 57 12.3 Certain Definitions......................................... 58 12.4 Headings.................................................... 59 12.5 Severability................................................ 59 12.6 Entire Agreement............................................ 59 12.7 Assignment.................................................. 60 12.8 Parties In Interest......................................... 60 12.9 Governing Law............................................... 60 12.10 Counterparts................................................ 60 12.11 Time Is of the Essence...................................... 60 12.12 Amendment................................................... 60 12.13 Waiver of Jury Trial........................................ 60 12.14 Consent to Jurisdiction..................................... 60
29 STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (this "AGREEMENT"), dated as of April 9, 1999, by and between Spinnaker Industries, Inc., a Delaware corporation ("SELLER"), and Intertape Polymer Group Inc., a corporation organized under the Canada Business Corporations Act ("BUYER"). WITNESSETH: WHEREAS, Seller is the record and beneficial owner of all of the outstanding capital stock of Central Products Company, a Delaware corporation (the "COMPANY") engaged in the business of the design, development, manufacture and sale of industrial tapes; and WHEREAS, Buyer desires to acquire from Seller all of the outstanding capital stock of the Company from Seller, and Seller desires to sell, assign, transfer, convey and deliver to Buyer such stock, on the terms and subject to the conditions of this Agreement; and WHEREAS, concurrently with the execution and delivery of this Agreement, Buyer is entering into an asset purchase agreement of even date herewith (the "ASSET PURCHASE AGREEMENT") with Seller and Spinnaker Electrical Tape Company, a Delaware corporation and an affiliate of the Company engaged in the business of the design, development, manufacture and sale of industrial tapes. NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties and agreements contained in this Agreement, and subject to the terms and conditions set forth in this Agreement, the parties agree as follows: ARTICLE I PURCHASE AND SALE OF COMPANY SHARES 1.1 SALE OF COMPANY SHARES BY SELLER. Subject to the satisfaction or waiver of the conditions set forth in this Agreement, at the Closing (as defined in SECTION 1.2), Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase and accept from Seller, all of the outstanding capital stock of the Company (the "COMPANY SHARES"), free and clear of all restrictions on transfer (subject, however, to restrictions on the transferability thereof under all applicable securities laws and regulations thereunder), Taxes, liens, options, warrants, purchase rights, contracts, commitments, equities, claims and demands (other than the rights of Buyer under this Agreement). 1.2 TIME AND PLACE OF CLOSING. (a) The closing of the transactions contemplated hereby (the "CLOSING") will take place on the Closing Date (defined below) or at such other time as the parties agree. The Closing shall be held at the offices of Morgan, Lewis & Bockius LLP located at 101 Park Avenue, New York, New York 10178 or such location as may be agreed upon by the parties. The parties shall use reasonable efforts to cause the Closing to occur on the first business day following the later to occur of (i) the effective date (including expiration of any applicable waiting period) of the last required consent of any regulatory authority having authority over and approving or exempting the contemplated transaction or (ii) after all the remaining conditions set forth in ARTICLE IX are satisfied or waived (the "CLOSING DATE"). (b) At the Closing: (i) Buyer shall deliver Seller (A) immediately available funds by wire transfer to an account specified by Seller in an amount equal to the Purchase Price (as defined in SECTION 2.1), offset as provided in Section 2.1, (B) a Warrant Agreement, substantially in the form attached hereto as EXHIBIT A, and (C) the opinion, certificates and other agreements and documents set forth in ARTICLE IX; (ii) Seller shall deliver to Buyer (A) the certificate or certificates representing all of the Company's outstanding capital stock, either duly endorsed for transfer to Buyer or accompanied by appropriate duly executed stock powers and with all requisite stock transfer stamps and taxes attached or provided for, (B) the opinion, certificates and other documents set forth in ARTICLE IX, and (C) resignations from each member of the Company's Board of Directors; and 30 (iii) (A) All intercompany receivables and all intercompany debt, together with all interest thereon to the Closing Date, shall be eliminated and (B) such amounts as are required to obtain a release of the Company Shares and assets of its business at the Closing Date under that certain Revolving Loan and Letter of Credit Facility, dated October 23, 1996, by and among Central Products Company, Spinnaker Coating, Inc., Spinnaker Coating-Maine, Inc. and Entoleter, as Borrowers, Spinnaker Industries, Inc., as Guarantor, and the other parties thereto, as amended from time to time (the "CREDIT AGREEMENT"), shall be repaid. Current Federal income taxes receivable and payable shall be considered intercompany balances for purposes of this Section. ARTICLE II PURCHASE PRICE 2.1 PURCHASE PRICE. The aggregate purchase price for the Company Shares shall be Eighty Million United States Dollars (US $80,000,000) (the "PURCHASE PRICE"). The payment being made pursuant to SECTION 1.2(b)(iii)(B) above shall be offset against the Purchase Price, the balance of which shall be delivered by Buyer to Seller at Closing by wire transfer in immediately available federal funds to an account designated by Seller by written notice to Buyer given at least two days prior to the Closing Date. The portion of the Purchase Price allocable to the non-competition provisions of SECTION 7.9 shall be Seven Million United States Dollars (US $7,000,000). ARTICLE III SELLER REPRESENTATIONS AND WARRANTIES Except as set forth in the Disclosure Schedule delivered by Seller to Buyer attached to and incorporated in this Agreement (the "DISCLOSURE SCHEDULE"), which Disclosure Schedule shall reference disclosure items by section, Seller represents and warrants to Buyer as follows: 3.1 ORGANIZATION; TITLE TO COMPANY SHARES. Seller is a corporation validly existing and in good standing under the laws of the State of Delaware. Seller is, and on the Closing Date will be, the record and beneficial owner of the Company Shares, and Seller owns, and on the Closing Date will own, the Company Shares free and clear of all restrictions on transfer, Taxes, liens, options, warrants, purchase rights, contracts, commitments, equities, claims and demands (other than restrictions on transferability under applicable securities laws and regulations thereunder and the rights of Buyer under this Agreement), except as set forth in SECTION 3.1 of the Disclosure Schedule. The delivery on the Closing Date of the certificates representing the Company Shares purchased hereunder to Buyer will transfer to Buyer good, valid and marketable title to the Company Shares, free and clear of all restrictions on transfer (other than restrictions on transferability under applicable securities laws and regulations thereunder), Taxes, liens, options, warrants, purchase rights, contracts, commitments, equities, claims and demands. From and after the Closing, neither Seller nor any other person (other than Buyer) will have any rights whatsoever to the Company Shares, any other securities of the Company or any options or other rights convertible or exchangeable into such Company Shares or other securities with respect to the Company. 3.2 CERTIFICATE OF INCORPORATION AND BYLAWS. Seller previously has furnished to Buyer a true, complete and accurate copy of its Certificate of Incorporation and Bylaws, as amended or restated (the "SELLER CERTIFICATE AND BYLAWS"). Such Seller Certificate and Bylaws are in full force and effect. Seller is not in violation of any of the provisions of the Seller Certificate and Bylaws. 3.3 AUTHORITY. Seller has the requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Seller and the consummation by Seller of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of Seller are necessary to authorize this Agreement or to consummate the transactions contemplated hereby (other than applicable stockholder approvals). This Agreement has been duly executed and delivered by, and constitutes a valid and binding obligation of, Seller and, assuming due authorization, execution and delivery by Buyer, is enforceable against Seller in accordance with its terms, except 31 as enforcement may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally. 3.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and delivery of this Agreement by Seller does not, and the performance of this Agreement and the transactions contemplated hereby by Seller shall not, (i) conflict with or violate the Seller Certificate and Bylaws (ii) conflict with or violate any federal or state law, statute, ordinance, rule, regulation, order, judgment or decree (collectively, "LAWS") applicable to Seller or by which it or any of its properties are bound or affected, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration, cancellation of, or result in the creation of a Lien (as defined in SECTION 11.3) on Seller, the Company or any of their respective assets pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Seller is a party or by which it or any of its properties are bound or affected, except in the case of clauses (ii) and (iii) for any such conflicts, violations, breaches, defaults or other occurrences that individually or in the aggregate, would not, or be reasonably likely to have, have a Material Adverse Effect with respect to Seller or the Company. (b) The execution and delivery of this Agreement by Seller does not, and the performance of this Agreement by Seller shall not, require any consent, approval, authorization or permit of, or filing with or notification to any governmental or regulatory authority or any third party except for applicable requirements, if any, of the Securities Act of 1933, as amended (the "SECURITIES ACT"), the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), state securities or blue sky laws ("Blue Sky Laws"), the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), the filing of other documents as required by applicable law, applicable transfer tax filings and where the failure to obtain such consents, approvals, authorizations or permits would not prevent or delay consummation of the transaction contemplated hereby, or otherwise prevent Seller from performing its obligations under this Agreement or would be such as to result in, or be reasonably likely to result in, a Material Adverse Effect with respect to Seller or the Company. 3.5 ABSENCE OF LITIGATION. Seller is not a party to any, and there are no pending or, to the knowledge of Seller, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Seller challenging the validity or propriety of the transactions contemplated by this Agreement which if unfavorably determined would prevent the consummation of the transactions contemplated hereby, except where such events would not have, or be reasonably likely to have, a Material Adverse Effect with respect to Seller or the Company. There are no claims or judgments pending with respect to which Seller has been duly served or otherwise received notice as of the date of this Agreement or, to the knowledge of Seller, threatened against Seller or the Company or outstanding against Seller or the Company or affecting Seller or the Company, that in the aggregate would have a Material Adverse Effect on the Company. No injunction, order, judgment, decree or regulatory restriction has been imposed on Seller or the assets of Seller which has had or reasonably could be expected to have a Material Adverse Effect with respect to the Company. 3.6 BROKERS. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Seller, except as provided in that certain letter agreement between Seller and Schroder & Co. Inc. regarding such fees, which fees are the sole responsibility of, and are to be paid by, Seller. 3.7 DISCLOSURE. No representation or warranty of Seller contained in this Agreement, and no statement contained in the Disclosure Schedule or in any certificate, list or other writing furnished to Buyer pursuant to any provision of this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. 32 ARTICLE IV COMPANY REPRESENTATIONS AND WARRANTIES Except as set forth in the Disclosure Schedule delivered by Seller to Buyer attached to and incorporated in this Agreement (the "DISCLOSURE SCHEDULE"), which Disclosure Schedule shall reference disclosure items by section, Seller represents and warrants to Buyer, with respect to the Company and, as to Taxes, Seller represents and warrants to Buyer with respect to both Seller and the Company, as follows: 4.1 ORGANIZATION; APPROVALS. The Company is a corporation validly existing and in good standing under the laws of the State of Delaware. The Company has the requisite corporate power and authority and is in possession of all franchises, grants, authorizations, licenses, permits, easements, consents, certificates, approvals and orders ("COMPANY APPROVALS") necessary to own, lease and operate its properties and to carry on its business as it is now being conducted, and the Company has not received any notice of proceedings relating to the revocation or modification of any Company Approvals, except where the failure to be so organized, existing and in good standing or to have such power, authority, Company Approvals and revocations or modifications would not, individually or in the aggregate, have a Material Adverse Effect (as defined in SECTION 10.3) with respect to the Company. 4.2 CAPITAL STOCK. As of the date hereof and as of the Closing Date, the authorized capital stock of the Company consists of 200,000 shares of common stock, no par value. As of the date hereof and as of the Closing Date, the only issued and outstanding shares of common stock are the Company Shares, all of which are, and on the Closing Date will be, duly authorized, validly issued, fully paid and nonassessable, and the issuance thereof was in compliance with all applicable Laws. Except for the Company Shares, no shares of capital stock of the Company have been issued, are held in treasury or are reserved for issuance. There are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require the Company to issue, sell, or otherwise cause to become outstanding any of its capital stock (other than the rights of Buyer under this Agreement). There are no outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights with respect to the Company. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of the Company Shares. There are no preemptive rights or agreements, arrangements or understandings to issue preemptive rights with respect to the issuance or sale of the Company's capital stock. 4.3 CERTIFICATE OF INCORPORATION AND BYLAWS. The Company previously has furnished to Buyer a true, complete and accurate copy of its Certificate of Incorporation and Bylaws, as amended or restated (the "COMPANY CERTIFICATE AND BYLAWS"). Such Company Certificate and Bylaws are in full force and effect. The Company is not in violation of any of the provisions of the Company Certificate and Bylaws. 4.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The transactions contemplated hereby by the Company shall not, (i) conflict with or violate the Company Certificate and Bylaws (ii) conflict with or violate any Laws applicable to the Company or by which it or any of its properties are bound or affected, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration cancellation of, or result in the creation of a Lien on the Company or any of its assets pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company is a party or by which it or any of its properties are bound or affected, except in the case of clauses (ii) and (iii) for any such conflicts, violations, breaches, defaults or other occurrences that individually or in the aggregate, would not have a Material Adverse Effect with respect to the Company. (b) No consent, approval, authorization or permit of, or filing with or notification to any governmental or regulatory authority or any third party except for applicable requirements, if any, of the Securities Act, the Exchange Act, the HSR Act, or Blue Sky Laws, the filing of other documents as required by applicable law, applicable transfer tax filings is required to be obtained by the Company in connection with the transactions contemplated hereby, except where the failure to obtain such consents, approvals, authorizations or permits would not prevent or delay consummation of the transactions contemplated hereby, or otherwise prevent the Company from performing its obligations under this Agreement or 33 would be such as to result in, or be reasonably likely to result in, a Material Adverse Effect with respect to the Company. 4.5 COMPLIANCE; PERMITS. The Company is not in conflict with, or in default or violation of, (i) any Law applicable to the Company or by which the Company is bound or affected, or (ii) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company is a party or by which the Company is bound or affected, except for any such conflicts, defaults or violations which would not, individually or in the aggregate, have a Material Adverse Effect with respect to the Company. 4.6 INVENTORY. The inventory of the Company consists of raw materials and supplies, manufactured and processed parts, work-in-progress and finished goods, all of which is merchantable and fit for the purpose for which it was procured or manufactured, and none of which is slow-moving, obsolete, damaged or defective, subject to the reserve for inventory writedown set forth on the Company's balance sheet at December 31, 1998 (or in any notes thereto), and as adjusted for operations and transactions through the Closing Date in accordance with the past custom and practice of the Company. 4.7 ACCOUNTS RECEIVABLE. The accounts receivable of the Company are reflected properly on its books and records, are valid receivables subject to no setoffs or counterclaims, are current and collectible, and will be collected in accordance with their terms at their recorded amounts, subject to the reserve for bad debts set forth on the Company's balance sheet at December 31, 1998 (or in any notes thereto), and as adjusted for operations and transactions through the Closing Date in accordance with the past custom and practice of the Company. All accounts receivable of the Company are listed on SECTION 4.7 of the Disclosure Schedule. 4.8 FINANCIAL STATEMENTS. (a) Prior to the execution of this Agreement, Seller has delivered to Buyer complete and correct copies of the Company's unaudited balance sheet and related income statements and statements of cash flow for the eleven month period ended November 30, 1998 and the years ended December 31, 1998, and December 31, 1997, respectively, and Seller's audited consolidated balance sheet and related income statements and statements of cash flow for the year ended December 31, 1998 (the "FINANCIAL STATEMENTS"). All such Financial Statements are complete and correct in all material respects and were (i) prepared from the books of account or other financial records of the Company and Seller, respectively (ii) prepared in accordance with GAAP applied on a consistent basis throughout the periods involved, and (iii) fairly present in all material respects the financial position of the Company and the consolidated financial position of Seller at the respective dates and the results of operations and cash flows and the consolidated results of operations and cash flows (as applicable) for the periods indicated, except that the interim consolidated financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount and do not have any footnote disclosures. (b) Except (i) for the liabilities that are fully reflected in the Financial Statements (including any related notes thereto) or not required to be reflected in accordance with GAAP and (ii) for the liabilities incurred in the ordinary course of business consistent with past practice since December 31, 1998, the Company has not incurred any liability that, either alone or when combined with all similar liabilities, has had or would have a Material Adverse Effect with respect to the Company. 4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the Financial Statements or reports filed by Seller pursuant to the Securities Act or the Exchange Act (the "SELLER REPORTS") filed prior to the date of this Agreement, since December 31, 1998 to the date of this Agreement, the Company has conducted its business only in the ordinary course and in a manner consistent with past practice and, since December 31, 1998, there has not been (i) any change in the financial condition, results of operations or business of the Company having a Material Adverse Effect with respect to the Company, (ii) any damage, destruction or loss not covered by insurance with respect to any assets of the Company having a Material Adverse Effect with respect to the Company, (iii) any declaration, setting aside or payment of any dividends or distributions in respect of shares of capital stock of the Company or any redemption, purchase or other acquisition of any of its securities, (iv) any entering into of any new, or modification, amendment or termination (partial or complete) of, any existing 34 collective bargaining agreement, contract or other agreement or understanding with a labor union or similar organization to which the Company has been, or is, a party or Plan (as defined in SECTION 4.11 below), or other increase in the salary, bonus, rate of commission or rate of consulting fees payable or to become payable to any directors, officers, employees or consultants of Seller or Company, or employment or severance agreement or other employee compensation arrangement with any of its directors, officers or employees (whether new hires or existing employees), in each case where such compensation or arrangement exceeds $75,000, or (v) any union organizing activities relating to employees of Seller or Company or any entering into of any other material transaction involving or affecting each of Seller or Company outside the ordinary course of business of such Seller or Company consistent with past practice. 4.10 ABSENCE OF LITIGATION. The Company is not a party to any, and there are no pending or, to the knowledge of the Company, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against the Company challenging the validity or propriety of the transactions contemplated by this Agreement which if unfavorably determined would prevent the consummation of the transactions contemplated hereby. There are no claims and judgments pending with respect to which the Company has been duly served or otherwise received notice as of the date of this Agreement, or, to the knowledge of the Company, threatened against the Company or outstanding against the Company or affecting the Company, that in the aggregate would have a Material Adverse Effect on the Company. No injunction, order, judgment, decree or regulatory restriction has been imposed on the Company or the assets of the Company which has had or reasonably could be expected to have a Material Adverse Effect with respect to the Company. 4.11 EMPLOYEE BENEFIT PLANS. (a) PLANS OF THE COMPANY. Section 4.11(a) of the Disclosure Schedule lists (i) all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and all bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements and all employment termination, severance or other employment contracts or employment agreements, with respect to which the Company has any obligation and which benefit any of its employees (collectively, the "PLANS"). The Company has furnished or made available to Buyer a copy of each Plan (or a description of the Plans, if the Plans are not in writing) and a copy of each material document prepared in connection with each such Plan, including, without limitation, and where applicable a copy of (i) each trust or other funding arrangement, (ii) each summary plan description and summary of material modifications, (iii) any IRS Forms 5500 and related schedules filed since August 1998, (iv) any IRS determination letter for each such Plan issued since August 1998, (v) any actuarial and financial statements in connection with each such Plan issued since August 1998, and (vi) any other material information relating to each such Plan as requested by Buyer, to the extent it is available to the Company. (b) ABSENCE OF CERTAIN TYPES OF PLANS. No Plan is described in Section 401(a)(1) of ERISA. SECTION 4.11(b) of the Disclosure Schedule lists all Plans that obligate the Company to pay separation, severance, termination or similar-type benefits as a result of any transaction contemplated by this Agreement or as a result of a "change in control," within the meaning of such term under Section 280C of the Code. (c) COMPLIANCE WITH APPLICABLE LAW. Except as set forth in SECTION 4.11(c) of the Disclosure Schedule, each Plan has been operated in all material respects in accordance with the requirements of all applicable Law and all persons who participate in the operation of such Plans and all Plan "fiduciaries" (within the meaning of Section 3(21) of ERISA) have acted in all material respects in accordance with the provisions of all applicable Law. The Company has performed in all material respects all obligations required to be performed by it under the Plans, is not in material default under or in material violation of the Plans and the Company and Seller have no knowledge of any such default or violation by any party to the Plans. (d) QUALIFICATION OF CERTAIN PLANS. Each Plan that is intended to be qualified under Section 401(a) of the Code or Section 401(k) of the Code (including each trust established in connection with such a Plan that is intended to be exempt from Federal income taxation under Section 501(a) of the Code) has received a 35 favorable determination letter from the Internal Revenue Service ("IRS") that it is so qualified, and the Company is not aware of any material fact or event that has occurred since the date of such determination letter from the IRS to adversely affect the qualified status of any such Plan. No trust is maintained or contributed by the Company or the Seller to fund any Plan that is intended to be qualified as a voluntary employees' beneficiary association or is intended to be exempt from federal income taxation under Section 501(c)(9) of the Code. (e) ABSENCE OF CERTAIN LIABILITIES AND EVENTS. The Company has not incurred any liability under Title IV of ERISA or for any excise tax arising under Section 4971 through 4980E of the Internal Revenue Code of 1986, as amended (the "CODE") and to the knowledge of the Company or the Seller no fact or event exists that could give rise to any such material liability. (f) PLAN CONTRIBUTIONS. All contributions, premiums or payments required to be made with respect to any Plan have been made. (g) MULTIEMPLOYER PLANS. No Plan is a multiemployer plan (within the meaning of Section 3(37) of ERISA). (h) POST-RETIREMENT MEDICAL. Each Plan that provides medical or life benefits beyond an employee's termination of employment (other than as required by applicable Law) is disclosed on SECTION 4.11(h) of the Disclosure Schedule. 4.12 LABOR AND EMPLOYMENT MATTERS. (a) Except for confidentiality, noncompetition, consulting or other similar contracts with any employees, consultants, officers or directors of the Company set forth in SECTION 4.12(a) of the Disclosure Schedule, the Company is not a party to any such contracts. Each such contract is in full force and effect and neither the Company nor Seller or, to the knowledge of the Company or Seller, any other party to such contract has received notice that the Company is in violation or breach of or default in any material respect under any such contract (or with notice or lapse of time or both, would be in violation or breach of or default in any material respect under any such contract). (b) Except as set forth in SCHEDULE 4.12(b) of the Disclosure Schedule: (i) the Company's current employees are not represented by a labor union or organization, no labor union or organization has been certified or recognized as a representative of any such current employees, and the Company is not a party to and/or has any obligation under any collective bargaining agreement or other labor union contract, white paper or side agreement with any labor union or organization or any obligation to recognize or deal with any labor union or organization, and there are no such contracts, white papers or side agreements pertaining to or which determine the terms or conditions of employment of any current employee of either the Company; (ii) there are no pending or threatened representation campaigns, elections or proceedings or questions concerning union representation involving any current employees; (iii) neither the Company nor Seller has knowledge of any activities or efforts of any labor union or organization (or representatives thereof) to organize any current employees of the Company, nor of any demands for recognition or collective bargaining, nor of any strikes, slowdowns, work stoppages or lock-outs of any kind, or threats thereof, by or with respect to any current employees or any actual or claimed representatives thereof, and no such activities, efforts, demands, strikes, slowdowns, work stoppages or lock-outs have occurred for the past 24 months; (iv) the Company has not engaged in, admitted committing or been held in any administrative or judicial proceeding to have committed any unfair labor practice under the National Labor Relations Act, as amended; (v) the Company is not involved in any industrial or trade dispute or any dispute or negotiations regarding a claim of material importance with any labor union or organization; and (vi) there are no controversies, claims, demands or grievances of material importance pending or, so far as the Company or Seller are aware, threatened, between the Company on the one hand, and any of its employees or any actual or claimed representative thereof on the other hand. (c) The Company is in material compliance with all Laws relating to the employment of labor, including but not limited to such Laws relating to wages, hours, the Worker Adjustment Retraining and Notification Act of 1988 ("WARN"), collective bargaining, discrimination, civil rights, safety and health, 36 worker's compensation and the collection and payment of withholding and/or social security taxes and any similar tax. 4.13 TANGIBLE PERSONAL PROPERTY. The Company has, or will as of Closing have, good and indefeasible title to all of its owned tangible personal property and assets, free and clear of all Liens, except liens for Taxes not yet due and payable, pledges to secure deposits and such minor imperfections of title, if any, as do not materially detract from the value of or interfere with the present use of such property or which, individually or in the aggregate, would not have a Material Adverse Effect with respect to the Company. All leases pursuant to which the Company leases from others tangible or personal property are in good standing, valid and effective in accordance with their respective terms. All items of tangible personal property are listed in Disclosure Schedule SECTION 4.13, indicating which such tangible personal property is owned or leased. All such tangible personal property is adequate and suitable for the conduct of the business of the Company and is in good working order and condition, ordinary wear and tear excepted. 4.14 ENVIRONMENTAL MATTERS. Seller represents and warrants as follows: (i) the Company, all real property owned by the Company (the "REAL PROPERTY") and real property subject to leases entered into by the Company (the "REAL PROPERTY LEASES") are in compliance with all applicable Environmental Laws (as defined below); (ii) there is no amount of asbestos or ureaformaldehyde material in or on any property owned, leased or operated by the Company or the Seller in connection with the Company; (iii) there are no underground storage tanks located on, in or under any properties currently owned, leased or operated by the Company or Seller in connection with the Company that violate or result in liability under any Environmental Law (as defined below); (iv) neither the Company nor Seller have been notified by any governmental agency or third party of any pending or threatened Environmental Claim (as defined below) against the Company or Seller in connection with the Company; (v) neither the Company nor Seller have been notified by any governmental agency or any third party that either the Company or Seller in connection with the Company may be a potentially responsible party for environmental contamination or any Release (as defined below) of Hazardous Materials (as defined below); (vi) the Company has obtained and holds all permits, licenses and authorizations required under applicable Environmental Laws relating to the ownership or operations of the Company ("ENVIRONMENTAL PERMITS"); (vii) the Company is in compliance with all terms, conditions and provisions of all applicable Environmental Permits; (viii) no Releases of Hazardous Materials have occurred at, from, in, on, to or under any property currently or formerly owned, operated or leased by the Company or Seller in connection with the Company or any predecessors of the Company or Seller in connection with the Company, and no Hazardous Materials are present in, on or about or migrating to or from any such property that could give rise to an Environmental Claim by a third party (including any governmental entity or private party) against the Company; (ix) neither the Company nor Seller in connection with the Company nor any predecessors thereof have transported or arranged for the treatment, storage, handling, disposal or transportation of any Hazardous Material to any location which could result in an Environmental Claim against or liability to the Company; and (x) there have been no environmental investigations, studies, audits or tests conducted by, on behalf of or which are in the possession of any Seller or Company with respect to any property currently or formerly owned, leased or operated by either Seller or Company in connection with the Company thereof which have not been delivered to Buyer prior to execution of this Agreement, except in each case where such event or condition would not have a Material Adverse Effect on the Company. For purposes of this Section, "ENVIRONMENTAL CLAIMS" shall mean any and all administrative, regulatory, judicial or private actions, suits, demands, notices, claims, liens, investigations, injunctions or similar proceedings that may create liability for Seller relating in any way to: (i) any Environmental Law; (ii) any Hazardous Material, including without limitation, any investigation, monitoring, abatements, removal, remedial, corrective or other response action in connection with any Hazardous Material, Environmental Law or order or notice of liability or violation of a governmental entity or Environmental Law; or (iii) any actual or alleged damage, injury, threat or harm to the environment. "HAZARDOUS MATERIALS" shall mean any and all chemicals, pollutants, contaminants, wastes, toxic substances, compounds, products, solid, liquid, gas, petroleum, asbestos, asbestos-containing materials, polychlorinated biphenyls or other regulated substances or materials which are hazardous, toxic or otherwise harmful to the environment. 37 "ENVIRONMENTAL LAW" shall mean any and all federal and state civil and criminal laws, statutes, ordinances, orders, codes, rules or regulations of any governmental or regulatory authority relating to the protection of health, the environment, natural resources, worker health and safety and/or governing the handling, use, generation, treatment, storage, transportation, disposal, manufacture, distribution, formulation, packaging, labeling, or Release of Hazardous Materials, including but not limited to: the Clean Air Act, 42 U.S.C. Section7401 ET SEQ.; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section9601 ET SEQ.; the Federal Water Pollution Control Act, 33 U.S.C. Section1251 ET SEQ.; the Hazardous Material Transportation Act 49 U.S.C. Section1801 ET SEQ.; the Federal Insecticide, Fungicide and Rodenticide Act 7 U.S.C. Section136 ET SEQ.; the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section2601 ET SEQ.; the Occupational Safety & Health Act of 1970, 29 U.S.C. Section651 ET SEQ.; the Oil Pollution Act of 1990, 33 U.S.C. Section2701 ET SEQ.; and the state analogies thereto, all as amended or superseded from time to time, on or before, but not after, the date of Closing. "RELEASE" shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing of a Hazardous Material into the environment. 4.15 ABSENCE OF AGREEMENTS. The Company is not a party to any agreement, order, directive, memorandum of understanding or similar arrangement that restricts materially the conduct of the Company, except for those the existence of which has been disclosed in writing to Buyer prior to the date of this Agreement, nor has the Company been advised, that any person or governmental authority is contemplating issuing or requesting any such agreement, order, directive, memorandum of understanding or similar arrangement. 4.16 TAXES. (a) Seller and the Company have duly and timely filed all tax returns, reports or statements (including information statements) ("TAX RETURNS") with respect to the Company or any affiliated, combined, consolidated, unitary or similar group of which the Company is or was a member (a "RELEVANT GROUP"), which are required to have been filed with respect to all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, AD VALOREM, transfer, value added, franchise, withholding, payroll, employment, disability, excise, property, alternative or add-on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, except to the extent in dispute and set forth in the Disclosure Schedule at SECTION 4.16, together with any interest, penalties, additions to tax or additional amounts with respect thereto ("TAXES"); and each such Tax Return correctly and completely reflects the Tax liability and other information required to be reported thereon. All Taxes due and payable by the Company or Seller, and all Taxes shown on the Tax Returns, have been paid. (b) The Company has properly and fully accrued unpaid Taxes in its Financial Statements for the respective periods covered thereby. As of the Closing Date, the unpaid Taxes of the Company shall not exceed such provisions as adjusted for the passage of time through the Closing Date by any material amount. (c) Neither the Company nor Seller is a party to any agreement extending the time within which to file any Tax Return. To Seller's knowledge, no claim has been made by a jurisdiction in which the Company does not file Tax Returns that the Company is or may be subject to taxation by that jurisdiction. (d) The Company has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. (e) Neither Seller nor the Company have received any written ruling related to Taxes of the Company or entered into any written and legally binding agreement with any governmental agency, board, bureau, body, department or authority of any United States federal, state or local jurisdiction or any foreign jurisdiction, having or purporting to exercise jurisdiction with respect to any Tax (a "TAXING AUTHORITY") relating to Taxes of the Company. 38 (f) The Company has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, former employee, creditor, independent contractor, shareholder, customer, affiliate, supplier or other third party. (g) Seller has not been notified by any Taxing Authority of an intent to assess additional Taxes against or in respect of the Company for any past period. To the knowledge of Seller and the Company, there is no dispute or claim concerning any Taxes of the Company or the Seller (as relating to the Company) either (i) claimed or raised by any Taxing Authority or (ii) otherwise known to Seller. 4.17 INSURANCE. SECTION 4.17 of the Disclosure Schedule lists all policies of insurance of the Company currently in effect. Each policy listed on such schedule is valid and in full force and effect. The Company has no liability for unpaid premiums or premium adjustments not properly reflected on the applicable financial statements. 4.18 MATERIAL CONTRACTS. Except as included as exhibits in Seller Reports, the Company is not a party to or obligated under any material contract, agreement or other instrument or understanding that is not terminable by the Company without additional payment or penalty within 90 days. 4.19 SUBSTANTIAL CUSTOMERS AND SUPPLIERS. SECTION 4.19 of the Disclosure Schedule lists the 5 largest customers or clients of the Company on the basis of revenues for goods sold or services provided in the fiscal year ended 1997 and the 10 largest customers or clients in the fiscal year ended 1998. SECTION 4.19 of the Disclosure Schedule lists the 10 largest suppliers of the Company on the basis of cost of goods or services purchased in the fiscal years ended 1996, 1997 and 1998. For each such customer or supplier set forth on such Schedule, a copy of such supplier or customer contract, agreement or understanding with the Company or Seller has been delivered to Buyer prior to execution of this Agreement. No such customer, client or supplier has ceased or materially reduced its purchases from or sales or provision of services to the Company since December 31, 1998, or to the knowledge of the Company or Seller, has threatened to cease or materially reduce such purchases or sales or provision of services after the date of this Agreement. Except for deposits or other non-material amounts paid in the ordinary course of business consistent with past practice, the Company has not accepted any prepayment of any sales price or fee or license fee from any client or customer that relates to products not yet delivered or services not yet performed by Seller. 4.20 INTELLECTUAL PROPERTY. (a) The Company owns all right, title and interest in or possesses adequate licenses or other rights to use (i) all discoveries and inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications (either filed or in preparation for filing), and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions and reexaminations thereof, (ii) all trademarks, service marks, trade dress, brand names, logos, trade names, Internet domain names, and corporate names, together with all translations, adaptations, derivations and combinations thereof and including all goodwill associated therewith, and all applications (either filed or in preparation for filing), registrations and renewals in connection therewith, (iii) all copyrightable works, all copyrights and all applications (either filed or in preparation for filing), registrations and renewals in connection therewith, (iv) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, recipes, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals), (v) all computer software (including source code, data and related documentation), (vi) all other proprietary rights, (vii) all copies and tangible embodiments of all the foregoing (in whatever form or medium) ("INTELLECTUAL PROPERTY") used in or material to conduct the business of the Company without conflict with the rights of others. Disclosure Schedule SECTION 4.20(a) sets forth a description of (i) all Intellectual Property currently owned by or licensed to the Company and (ii) all licenses, royalties, assignments and other similar agreements relating to the foregoing to which the Company is a party and all agreements relating to technology, know-how or processes that the Company is licensed or authorized to use by others, or which it licenses or authorizes others to use, and which the Company uses (the "INTELLECTUAL PROPERTY AGREEMENTS"). No other Intellectual Property is used in or material to the conduct of the business of the Company. 39 (b) The Intellectual Property does not infringe or violate the intellectual property or contractual rights of any third parties in any country where the Company does business; to Seller's knowledge, no claim has been asserted or threatened by any person to the ownership of or right to use any Intellectual Property or challenging or questioning the validity or effectiveness of any such license or agreement, and neither the Company nor Seller has knowledge of a valid basis for any such claim; the Company and Seller have no knowledge of any claim that any product, activity or operation of the Company infringes upon or involves, or has resulted in the infringement of, any intellectual property rights of any other person, and no proceedings have been instituted, are pending or, to the best of the knowledge of the Company and Seller, are threatened which challenge the rights of the Company with respect thereto, and neither the Company nor Seller has knowledge of a valid basis for any such claim. (c) To Seller's knowledge, no Intellectual Property is being infringed by any third party; no action has been asserted or threatened that any Intellectual Property is being infringed by any third party. (d) All of the registrations and applications set forth in Disclosure Schedule SECTION 4.20(d) are in full force and effect and all necessary registration, maintenance and renewal fees in connection therewith have been made and all necessary documents and certificates in connection therewith have been filed with the relevant patent, copyright, trademark or other authority in the United States or foreign jurisdictions, as the case may be, for the purpose of maintaining the registrations or applications for registration of such Intellectual Property or updating record title thereto, except where such events, either individually or in the aggregate, would not, or be reasonably likely to, have a Material Adverse Effect on the Company. (e) All of the Intellectual Property is, or will be as of Closing, free and clear of any and all Liens. There are no restrictions on the direct or indirect transfer of the Intellectual Property, except as disclosed in any agreements licensing such Intellectual Property to the Company. (f) The Intellectual Property Agreements are valid and binding and in full force and effect, and true and correct copies have been provided to the Buyer; Seller has not granted any license, agreement or other permission to use such Intellectual Property except as disclosed on Disclosure Schedule SECTION 4.20(f); the consummation of the transactions contemplated by this Agreement will not violate nor result in the breach, modification, cancellation, termination or suspension of the Intellectual Property Agreements, and Seller is in compliance with, and has not breached any term of, any Intellectual Property Agreement, and, to the knowledge of Seller, all of the other parties to such Intellectual Property Agreements are in compliance with, and have not breached, any of the terms thereof; there is no dispute between Seller and any other party to any Intellectual Property Agreement regarding the scope of the license or performance under any applicable Intellectual Property Agreement, including with respect to any payments to be made by the Seller thereunder, except where such events, either individually or in the aggregate, would not have, or be reasonably likely to have, a Material Adverse Effect on the Company. (g) Seller has made available to Buyer prior to the execution of this Agreement any available documentation with respect to any invention, process, design, computer software and program or other know-how or trade secret or proprietary information included in such Intellectual Property, which documentation, if any, is accurate in all material respects and reasonably sufficient in detail and content to identify and explain such invention, process, design, computer software and programs or other know-how or trade secret or proprietary information. Seller has taken reasonable security measures to protect the secrecy, confidentiality and value of their trade secrets and proprietary information (including the reasonable enforcement by Seller of a policy requiring each employee or contractor to execute proprietary information and confidentiality agreements in substantially Seller's standard form, and to Seller's knowledge all current and former employees and contractors of Seller have executed such an agreement). 40 4.21 YEAR 2000 REPRESENTATION. No technology owned, developed or licensed by the Company or used in connection with the business (including, but not limited to, information systems and technology, commercial and noncommercial hardware and software, firmware, mechanical or electrical products, embedded systems, or any other electro-mechanical or processor-based system, whether as part of a desktop system, office system, building system or otherwise) (collectively, the "TECHNOLOGY") will experience any malfunctions, premature cancellation or expiration of contractual rights or deletion of data, or any other problems in connection with (i) the year 2000 (and all subsequent years) as distinguished from 1900 years, (ii) the date February 29, 2000, and all subsequent leap years, and (iii) the date September 9, 1999, except where such problems, either individually or in the aggregate, would not have a Material Adverse Effect on the Company. 4.22 REAL PROPERTY. SECTION 4.22 of the Disclosure Schedule lists those parcels of real property used, occupied or operated by the Company (the "REAL PROPERTY") and all leases, including capitalized leases, for real property used by the Company (the "REAL PROPERTY LEASES"). The Real Property and Real Property Leases are the only property of similar type used by the Company. The Company owns the Real Property in fee subject to no Liens, except for those set forth in SECTION 4.22 of the Disclosure Schedule. The Company's interest in the Real Property Leases is subject to no Liens, except for those set forth in SECTION 4.22 of the Disclosure Schedule. True and correct copies of the Real Property Leases have been delivered or made available to Buyer by the Company. Subject to the terms of the respective Real Property Leases, the Company has a valid and subsisting leasehold estate in and the right to quiet enjoyment to the property subject thereto for the full term of the respective Real Property Lease. The Real Property Leases are in full force and effect adequate and suitable for the conduct of the business of the Company and are enforceable in accordance with their respective terms, except as such enforceability may be subject to or limited by bankruptcy, insolvency, reorganization or other similar Laws, now or hereafter in effect, affecting the enforcement of creditors' rights generally. The Company has not assigned, pledged, mortgaged, hypothecated or otherwise transferred any Real Property Lease. The Company has not sublet all or any portion of any Leased Real Property. The Company has not received any written notice of default under any Real Property Lease, and to the Company's knowledge there is no material default by any tenant or landlord under any Real Property Lease, and no event has occurred or failed to occur which, with the giving of notice or the passage of time, or both, would constitute a material default under any Real Property Lease. No portion of any parcel of Real Property or real property subject to a Real Property Lease is located in an area designated as a flood zone by any governmental entity, except to the extent such property is adequately insured by a policy of flood insurance. The buildings, structures, facilities, fixtures and other improvements located on the Real Property and the Real Property are adequate and suitable for the conduct of the business of the Company and are in good working order and condition, ordinary wear and tear excepted. 4.23 DISCLOSURE. No representation or warranty of the Company contained in this Agreement, and no statement contained in the Disclosure Schedule or in any certificate, list or other writing furnished to Buyer pursuant to any provision of this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. 4.24 SUBSIDIARIES. The Company does not have any subsidiaries and the Company does not control, directly or indirectly, and does not hold any direct or indirect equity investment or participation in, any corporation, partnership, trust or other business association. 4.25 MATERIAL ADVERSE EFFECT. Since December 31, 1998 there has been no Material Adverse Effect with respect to the Company. 41 ARTICLE V BUYER REPRESENTATIONS AND WARRANTIES Except as set forth in the Disclosure Schedule delivered by Buyer to the Company and Seller attached to this Agreement (the "BUYER DISCLOSURE SCHEDULE"), which Buyer Disclosure Schedule shall reference disclosure items by section, Buyer represents and warrants to the Company and Seller as follows: 5.1 ORGANIZATION; APPROVALS. Buyer is a corporation validly existing and in good standing under the Canada Company Corporations Act. Buyer has the requisite corporate power and authority and is in possession of all franchises, grants, authorizations, licenses, permits, easements, consents, certificates, approvals and orders ("BUYER APPROVALS") necessary to own, lease and operate its properties and to carry on its business as it is now being conducted, and Buyer has not received any notice of proceedings relating to the revocation or modification of any Buyer Approvals, except where the failure to be so organized, existing and in good standing or to have such power, authority, Buyer Approvals and revocations or modifications would not, individually or in the aggregate, have a Material Adverse Effect with respect to Buyer. 5.2 AUTHORITY. Buyer has the requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Buyer, the issuance of the warrants and the consummation by Buyer of the transaction contemplated hereby have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of Buyer are necessary to authorize this Agreement or to consummate the transaction contemplated hereby. This Agreement has been duly executed and delivered by, and constitutes a valid and binding obligation of, Buyer and, assuming due authorization, execution and delivery by the Company and Seller, is enforceable against Buyer in accordance with its terms, except as enforcement may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally. 5.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and delivery of this Agreement by Buyer does not, and the performance of this Agreement and the transaction contemplated hereby by Buyer shall not, (i) conflict with or violate the charter documents of Buyer, (ii) conflict with or violate any Laws applicable to Buyer or by which it or any of its properties are bound or affected, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any of the properties or assets of Buyer pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Buyer is a party or by which it or any of its properties is bound or affected, except in the case of clauses (ii) and (iii) for any such conflicts, violations, breaches, defaults or other occurrences that individually or in the aggregate, would not have a Material Adverse Effect with respect to Buyer. (b) The execution and delivery of this Agreement by Buyer does not, and the performance of this Agreement by Buyer shall not, require any consent, approval, authorization or permit of, or filing with or notification to any governmental or regulatory authority or any third party except for applicable requirements, if any, of the Securities Act, the Exchange Act, the Blue Sky Laws, the HSR Act, and filing of other documents as required by applicable law, applicable transfer tax filings and where the failure to obtain such consents, approvals, authorizations or permits would not prevent or delay consummation of the transaction contemplated hereby or otherwise prevent Buyer from performing its obligations under this Agreement and would not have, or be reasonably likely to have, a Material Adverse Effect with respect to Buyer. 5.4 ABSENCE OF LITIGATION. Buyer is not a party to any, and there are no pending or, to the knowledge of Buyer, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Buyer challenging the validity or propriety of the transactions contemplated by this Agreement which if unfavorably determined would prevent the consummation of the transaction contemplated hereby. 42 5.5 BROKERS. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Buyer, except as provided in that certain letter agreement between Buyer and Downer & Company L.L.C. regarding such fees, which fees are the sole responsibility of, and are to be paid by, Buyer. 5.6 DISCLOSURE. No representation or warranty of Buyer contained in this Agreement, and no statement contained in Buyer Disclosure Schedule or in any certificate, list or other writing furnished to the Company or Seller pursuant to any provision of this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. 5.7 HOLDING OF COMPANY SHARES. Buyer is not acquiring the Company Shares with an intention to distribute or transfer such Company Shares to another person. ARTICLE VI CERTAIN COVENANTS 6.1 AFFIRMATIVE COVENANTS. Seller covenants and agrees with Buyer that from and after the date of this Agreement and prior to the Closing Date, unless the prior written consent of Buyer shall have been obtained and except as otherwise contemplated herein, that Seller shall cause the Company to: (a) operate its business only in the ordinary course consistent with past practices; (b) use reasonable efforts to preserve intact its business organization and assets, maintain its rights and franchises, retain the services of its officers and key employees and maintain its relationships with customers; (c) use reasonable efforts to maintain and keep its properties in good repair and condition, ordinary wear and tear excepted; (d) use reasonable efforts to keep in full force and effect insurance and bonds comparable in amount and scope of coverage to that now maintained by it; (e) perform in all material respects all obligations required to be performed by it under all material contracts, leases and documents relating to or affecting the Company; (f) maintain its books and records in the usual, regular or ordinary manner consistent with past practice and provide Buyer access to such materials at a reasonable time and place as Buyer and the Company may agree; (g) use reasonable efforts to obtain all authorizations, consents, orders and approvals from all governmental or regulatory authorities that may be or become necessary for its execution and delivery of and the performance of its obligations under this Agreement; (h) take such reasonable action as shall be required to fulfill any and all contractual or statutory obligations the Company may have to any unions or labor organizations or otherwise as a result of or relating to the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby; (i) take reasonable actions required pursuant to the terms of any indentures, credit agreements, contracts or other agreements to address the consequences of the transactions contemplated by this Agreement, and to obtain the necessary consents and required releases pursuant to such indentures, credit agreements, contracts or agreements; (j) Seller shall deliver to Buyer all documents and information resulting from or relating to (i) all third party claims relating to, resulting from or arising out of that incident that occurred on or about December 4, 1998, involving the explosion and actual or potential Release of materials from, in, on, under or at the Company's Brighton, Colorado facility (hereinafter the "INCIDENT") and (ii) all policies 43 of insurance and relevant correspondence regarding claims asserted under such policies or otherwise that may cover or be applicable to such claims; (k) use its best efforts to secure from Heller Financial, Inc. releases of the security interests recorded against Company's trademark registrations and patents at the U.S. Patent and Trademark Office ("PTO"), record such releases at the PTO and provide to Buyer copies and proof of such releases and recordals; and (l) use its best efforts to secure from Unisource Brands, Inc. an assignment from Paper Corporation of America to Unisource Worldwide, Inc. of the trademark registrations for FLASH-TITE, GLASS-PAK, GREY CORE, STRES-FLEX and STRES-PRUF, record such assignment at the PTO and provide to Buyer copies and proof of such assignment and recordal. 6.2 NEGATIVE COVENANTS. Except as specifically contemplated by this Agreement, from the date of this Agreement until the Closing Date, the Seller shall cause the Company not to, without the prior written consent of Buyer, do any of the following: (a) except as required by applicable Law or to maintain qualification pursuant to the Code, adopt, amend, renew or terminate any Plan or any agreement, arrangement, plan or policy between the Company and one or more of the Company's current or former directors, officers or employees, or except for normal increases in the ordinary course of business consistent with past practice or except as required by applicable Law, increase in any manner the base salary, bonus incentive compensation or fringe benefits of any director, officer or employee or pay any benefit not required by any Plan or agreement as in effect as of the date of this Agreement (including without limitation the granting of stock options, stock appreciation rights, restricted stock, restricted stock units or performance units or shares); (b) declare or pay any dividend on, or make any other distribution in respect of, the Company's outstanding shares of capital stock; (c) (i) redeem, purchase or otherwise acquire any shares of the Company's capital stock or any securities or obligations convertible into or exchangeable for any shares of the Company's capital stock, or any options, warrants, conversion or other rights to acquire any shares of the Company's capital stock or any such securities or obligations; (ii) merge with or into any other corporation, permit any other corporation to merge into the Company or consolidate with any other corporation, or effect any reorganization or recapitalization; (iii) purchase or otherwise acquire any substantial portion of the assets, or of any class of stock, of any corporation; (iv) liquidate, sell, dispose of, or encumber any assets or acquire any assets, other than in the ordinary course of the Company's business consistent with past practice; or (v) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of the Company's capital stock; (d) issue, deliver, award, grant or sell, or authorize or propose the issuance, delivery, award, grant or sale of, any shares of any class of capital stock of the Company (including shares held in treasury) or any rights, warrants or options to acquire, any such shares, other than the issuance of the Company's common stock issuable upon exercise of employee or director stock options outstanding as of the date of this Agreement or pursuant to the Company's Plans, in effect as of the date of this Agreement; (e) propose or adopt any amendments to the Company Certificate and Bylaws in any way adverse to Buyer; (f) change any of its methods of accounting in effect at December 31, 1998 or change any of its methods of reporting income or deductions for federal income tax purposes from those employed in the preparation of the federal income tax returns for the taxable year ended December 31, 1998, except as may be required by Law or GAAP; (g) change in any material respect any material policies concerning the Company, except as required by Law, including without limitation: (i) sell, assign, transfer, pledge, mortgage or otherwise encumber any of its assets, except for those sales, assignments, transfers, pledges, mortgages and encumbrances (A) currently existing or provided for in existing agreements, (B) incurred in individual amounts of less 44 than $75,000 and in an aggregate amount of no more than $750,000 or (C) incurred in the ordinary course of business consistent with past practice; (ii) enter into any agreement with respect to any acquisition of a material amount of assets or any discharge, waiver, satisfaction, release or relinquishment of any material contract rights, liens, encumbrances, debt or claims, not in the ordinary course of business and consistent with past practices; (iii) settle any claim, action, suit, litigation, proceeding, arbitration, investigation or controversy of any kind, for any amount in excess of $75,000, net of any insurance proceeds, that would restrict in any material respect the Company; (iv) make any capital expenditure in excess of $500,000, except in the ordinary course and consistent with past practice; (v) make any investment of more than $100,000; or (vi) take any action or fail to take any action which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect with respect to the Company; provided, however, nothing in this Section shall prevent Seller or Company from eliminating intercompany assets and liabilities prior to Closing; and (h) agree in writing or otherwise to do any of the foregoing. 6.3 EXCLUSIVITY. For the period commencing on the date hereof and ending on the earlier of the termination of this Agreement, the date specified in SECTION 10.1(e) or the Closing (the "EXCLUSIVITY PERIOD"), except for discussions with Buyer and its representatives, neither Seller nor the Company will, directly or indirectly through any director, officer, shareholder, employee, agent, adviser or otherwise, orally or in writing, initiate, solicit, encourage, respond to, discuss, negotiate or accept any inquiries, indications of interest, proposals or offers from, or make any inquiries, indications of interest, proposals, offers, counter proposals or counteroffers to, or furnish any information to, any other person with respect to (i) an acquisition of shares of the Company, (ii) additional equity or convertible debt financing for the Company, (iii) an acquisition of all or a substantial part of the assets of the Company, or (iv) a merger, consolidation or any other transaction which would result in a change in control in the Company or a substantial change in the business of the Company. Further, during such Exclusivity Period Seller will promptly forward to Buyer any expressions of interest or other communications or inquiries received by it in any such regard. During the Exclusivity Period, Seller will make the books, records and management of the Company and management of Seller available to Buyer and its representatives for transition purposes. In addition, during the Exclusivity Period, Buyer agrees that it will not, except for discussions with Seller and its representatives, directly or indirectly through any director, officer, shareholder, employee, agent, adviser or otherwise, orally or in writing, initiate, solicit, encourage, respond to, discuss, negotiate or make any inquiries, indications of interest, proposals, offers, counter proposals or counteroffers to, or furnish any information to, any other person with respect to a material transaction with or in respect of such person. 6.4 ACCESS AND INFORMATION. (a) From the date of this Agreement until the Closing Date and upon reasonable notice, and subject to applicable Law relating to the exchange of information, Seller shall afford, and shall cause the Company to afford, to Buyer's officers, employees, accountants, legal counsel and other representatives, access during normal business hours to all the properties, books, contracts, commitments and records relating to the Company, but excluding any books, contracts, commitments and records in any way related to the sale of the Company. (b) From the date of this Agreement and until the Closing Date, Seller shall cause the Company to, or shall itself, furnish promptly to Buyer (i) a copy of each nonconfidential filing made by Seller with the Securities and Exchange Commission (the "SEC"), under the HSR Act or under any other applicable Laws promptly after such documents are available, (ii) a copy of each Tax Return filed by Seller for the three most recent years available with respect to or containing information pertaining to the Company, a copy of any correspondence received from the IRS or any other governmental entity or taxing authority or agency and any other correspondence relating to Taxes payable with respect to the Company, and (iii) all other information concerning the Company as Buyer may reasonably request, other than in each case reports or documents which neither the Company nor Seller is permitted to disclose under applicable Law or binding agreement entered into prior to the date of this Agreement. The parties will make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply. 45 (c) Unless otherwise required by Law, the parties will hold any such information which is nonpublic in confidence until such time as such information becomes publicly available through no wrongful act of either party, and in the event of termination of this Agreement for any reason each party shall promptly return all nonpublic documents obtained from any other party, and any copies made of such documents, to such other party or destroy such documents and copies. From the date hereof until the earlier of the Closing Date or the termination of this Agreement, and subject to the other provisions of this Agreement, the parties agree that they will take no actions outside of the ordinary course of business to harm the value of the business conducted by the Company; provided, however, that this limitation shall not limit the ability of the parties to engage in normal competition with each other (including, to the extent applicable, effecting price adjustments to their respective products). 6.5 UPDATE DISCLOSURE; BREACHES. (a) From and after the date of this Agreement until the Closing Date, the parties shall update their respective Disclosure Schedules by written notice to the other party to reflect any matters which have occurred from and after the date of this Agreement which, if existing on the date of this Agreement, would have been required to be described therein; provided that (i) to the extent that any information that would be required to be included in an update under this Section would have in the past been contained in internal reports prepared in the ordinary course, such update may occur by delivery of such internal reports prepared in accordance with past practice, and (ii) to the extent that updating required under this Section is unduly burdensome, Seller and Buyer will use their best efforts to develop alternate updating procedures utilizing, wherever possible, existing reporting systems. (b) Each party shall, in the event it becomes aware of the impending or threatened occurrence of any event or condition which would cause or constitute a material breach (or would have caused or constituted a material breach had such event occurred or been known prior to the date of this Agreement) of any of its representations, warranties or agreements contained or referred to herein, given prompt written notice thereof to the other party and use its best efforts to prevent or promptly remedy the same. 6.6 EXPENSES. All Expenses (as defined below) incurred by Buyer, on the one hand, and Seller and/or the Company, on the other hand, shall be borne solely and entirely by Buyer, on the one hand, and Seller, on the other hand. "EXPENSES" as used in this Agreement shall include all reasonable fees and out-of-pocket expenses (including without limitation all fees and expenses of counsel, accountants, investment bankers, experts and consultants to the party and its affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation and execution of this Agreement, the solicitation of stockholder approvals and all other matters related to the closing of the transactions contemplated hereby. Seller shall be liable for and assume and pay the broker's fees to Schroder & Co. Inc. and Buyer shall be liable for and shall assume and pay the broker's fees of Downer & Company LLC. 6.7 RETENTION OF RECORDS. Buyer shall retain all books and records of the Company that Buyer receives from the Company for a period of six years following the Closing Date. After the Closing, Seller and its representatives shall have reasonable access to all such books and records during normal business hours. In addition, Buyer shall upon reasonable request furnish to Seller, at Seller's expense, copies of any such books or records. ARTICLE VII ADDITIONAL AGREEMENTS 7.1 APPROPRIATE ACTION; CONSENTS; FILINGS. The parties shall use reasonable efforts to (i) do all things appropriate, necessary, proper or advisable under applicable Law to consummate and make effective the transactions contemplated by this Agreement, (ii) obtain all consents, licenses, permits, waivers, approvals, authorizations or orders required under Law in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and (iii) make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement required under the Securities Act and the Exchange Act and the rules and regulations thereunder, any other applicable federal or state securities laws and any other applicable Law; provided that, Buyer and the Company shall cooperate with 46 each other in connection with the making of all such filings that relate specifically to the transaction contemplated by this Agreement, including providing copies of all such documents to the non-filing party and its advisors prior to filing and, if requested, to accept all reasonable additions, deletions or changes suggested in connection therewith. 7.2 EMPLOYEE BENEFIT MATTERS. (a) RETENTION OF LIABILITY. Effective as of the Closing, the Company shall cease to participate in all Plans maintained or sponsored by Seller or any of its affiliates other than the Company and shall continue to sponsor all Plans sponsored and maintained exclusively for employees and former employees of the Company. Seller promptly after receiving written notice from Buyer (or one of its affiliates) shall reimburse Buyer (or one of its affiliates) for all costs (including payroll taxes) relating to the provision of any severance benefits or payments made to Transferred Employees (as hereinafter defined), up to a maximum reimbursement, when combined with any reimbursement of severance pursuant to Section 6.2(b) of the Asset Purchase Agreement, of $700,000.00. In addition, Seller shall be responsible for all claims for workers compensation benefits for all current and former employees of the Company with respect to all work-related injuries which occurred prior to the Closing, provided Buyer notifies Seller (directed to the attention of Craig Jennings) within three (3) business days of any report of such injury to Buyer by the employees. Seller shall assume all responsibility for any and all liabilities for all payments and benefits under the Key Employee Retention Plan. Seller shall also be responsible for any long-term or short-term disability benefits payable under the Spinnaker Industries Short Term and Long Term Disability Plans, to the extent such benefits are insured, the disability began or is found to have begun prior to the Closing Date, the disability claim was filed prior to the second anniversary of the Closing Date, and the disability claim was not filed by a former employee after such employee was involuntarily terminated from employment by the Buyer (or one of its affiliates). Seller shall cooperate with Buyer in effecting an assignment to Buyer of any policies or insurance for the provision of health or welfare benefits if requested by Buyer. (b) FLEXIBLE BENEFIT PLAN. On the Closing Date, Buyer (or one of its affiliates) shall cause to be maintained (for a period at least equal to the balance of the 1999 calendar year) for the benefit of all employees of the Company employed as of the Closing Date (the "TRANSFERRED EMPLOYEES") and all former employees of the Company for whom benefits are being provided under the Spinnaker Industries Flexible Benefits Plan (the "FLEX PLAN") as of the Closing Date (together with the Transferred Employees, the "Flex Employees"), a plan substantially identical to the Flex Plan. As soon as practicable thereafter, the Seller shall cause to be transferred to the Buyer the credit or debit balances in the various spending accounts under the Flex Plan for the Flex Employees. Following such transfer, Buyer (or one of its affiliates) shall be responsible for all liabilities for all Flex Employees under Buyer's Plan. (c) 401(k) PLAN. On or as soon as practicable after the Closing Date, Buyer (or one of its affiliates) shall cause to be maintained for the benefit of the Transferred Employees and all former employees of the Company for whom benefits are owing under the terms of the Spinnaker Industries Affiliates' 401(k) Plan (the "COMPANY 401(k) PLAN") (together referred to as the "401(k) EMPLOYEES"), a defined contribution plan intended to be qualified under Section 401(k) of the Code ("BUYER'S 401(k) PLAN"). As soon as practicable after the Closing Date, but in any event prior to the transfer referred to herein, Buyer shall deliver to Seller a copy of the most recent favorable determination letter for the Buyer's 401(k) Plan, or evidence that such determination letter is not necessary, or evidence of an application timely filed with the IRS for such a letter with respect to a newly adopted plan. In addition, if the Buyer's 401(k) Plan is a newly adopted plan for which a determination letter is necessary, Buyer shall make or cause to be made timely any and all amendments requested by the IRS in order to ensure that the Buyer's 401(k) Plan meets the requirements to ensure it receives a favorable determination letter. As soon as practicable thereafter, the Seller shall direct the trustee of the trust funding the Company 401(k) Plan to transfer to the trustee of the trust funding the Buyer's 401(k) Plan the aggregate individual account balances of the 401(k) Employees (whether or not vested). Individual account balance shall be valued as of the date of transfer, and the transfer shall be in cash or in kind, as determined by Buyer, except that outstanding loan balances shall be transferred in the form of notes or other documentation evidencing such loans. Prior to the date of the transfer, the Seller or its affiliates shall have contributed all contributions (including salary deferral and 47 matching contributions) attributable to service performed by the 401(k) Employees through the Closing Date. Following such transfer, Buyer (or one of its affiliates) shall be responsible for liabilities attributable to the 401(k) Employees under the Buyer's 401(k) Plan. In the event that the Buyer fails to obtain a favorable determination letter from the IRS in respect of the Buyer's 401(k) Plan, the Buyer shall indemnify Seller, from and after the Closing Date, against, and agrees to hold Seller harmless from, any and all damages incurred or suffered by Seller as a result of the Buyer's failure to satisfy the requirements of this SECTION 7.2(c). (d) DEFINED BENEFIT PLAN ASSET TRANSFERS. As soon as practicable (but in no event later than sixty (60) days) following the Closing Date, Seller shall cause the trustee of the master trust funding the Central Products Company Affiliated Employees' Pension Plan and the Central Products Company Retirement Plan (collectively, the "PENSION PLANS") to transfer, in accordance with the terms of the Pension Plans and the agreement creating the master trust, the assets of each of the Pension Plans to a trust (or trusts), qualifying under Section 501(a) of the Code, that is designated by Buyer to hold the assets of the Pension Plans. Such assets shall be transferred in cash or other marketable assets reasonably acceptable to Buyer and shall only be transferred after Buyer provides Seller with a copy of the agreement creating the Buyer's trust (or trusts) which is intended to be qualified under Section 501(a) of the Code. (e) NO RIGHTS. Nothing in this Section shall be construed to give any employee or former employee of the Company (or any beneficiary thereof) any rights of any kind, including any right to employment or continued employment with the Company or the right to any particular terms of employment, nor shall anything contained in this Section be construed to prevent the Company or any of its affiliates from terminating or modifying any benefit plan that they may establish or maintain. 7.3 NOTIFICATION OF CERTAIN MATTERS. Seller and the Company shall give prompt notice to Buyer, and Buyer shall give prompt notice to Seller and the Company, of (i) the occurrence or non-occurrence of any event, the occurrence or nonoccurrence of which would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate and (ii) any failure of Seller or the Company or Buyer, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this Section shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. 7.4 PUBLIC ANNOUNCEMENTS. Buyer and Seller shall consult with each other before issuing any press release or otherwise making any public statements with respect to the transaction contemplated hereby and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by Law or any listing agreement with or rule of the National Association of Securities Dealers, Inc. 7.5 CUSTOMER RETENTION. To the extent permitted by law or applicable regulation, Seller and the Company shall use reasonable efforts to assist Buyer in its efforts to retain the Company's customers. Such efforts may include making introductions of Buyer's employees to such customers, assisting in the mailing of information prepared by Buyer and reasonably acceptable to Seller and the Company, to such customers and actively participating in any "transitional" marketing programs as the Buyer may reasonably request. 7.6 NON-COMPETITION. (a) For a period commencing on the Closing Date and terminating on the third anniversary thereof (the "PERIOD"), as an inducement to Buyer to execute this Agreement and complete the transactions contemplated hereby, and in order to preserve the goodwill associated with the Company, Seller will not (1) engage in, continue in, participate in or have any interest in any sole proprietorship, partnership, corporation or business that is engaged primarily or in any material respect in the business of the manufacture, sale or distribution of pressure sensitive and water activated tape and industrial electrical tape serving either the retail or industrial end markets (the "PROHIBITED BUSINESS") in North America (the "TERRITORY"), (2) consult with, advise or assist in any way, whether or not for consideration, any corporation, partnership, firm or other business organization which is now or becomes a competitor of Buyer in any aspect with respect to the Prohibited Business, including, but not limited to, with respect to the Prohibited Business, advertising or otherwise endorsing the products of any such competitor, soliciting customers or otherwise serving as an intermediary for any such competition or 48 engaging in any form of business transaction on other than an arms'-length basis with any such competitor; or (3) unless Buyer has terminated such employee, solicit for employment any employee of the Company, without the prior consent of Buyer; PROVIDED, HOWEVER, that nothing herein shall be deemed to prevent (i) Seller from acquiring through market purchases and owning, solely as an investment, less than five percent of the equity securities of any class of any issuer whose shares are registered under Section 12(b) or 12(g) of the Exchange Act, and are listed or admitted for trading on any United States national securities exchange or are quoted on the Nasdaq National Market, or any similar system of automated dissemination of quotations of securities prices in common use, so long as Seller is not a member of any "control group" (within the meaning of the rules and regulations of the United States Securities and Exchange Commission) of any such issuer, (ii) any offer by Seller to employ a person in the Prohibited Business (except as set forth in this Section); or (iii) Seller from being acquired by a person engaged in any business in competition with the Prohibited Business of the Company. The parties agree that Buyer may sell, assign or otherwise transfer this covenant not to compete, in whole or in part, to any person, corporation, firm or entity that may hereafter own the Company Shares or succeeds to the business. The parties further agree that the geographic scope of this covenant not to compete shall extend to any city, county or other political subdivision of any country in the Territory, each of which is deemed to be separately named herein. Recognizing the specialized nature of the business transferred to Buyer and the scope of competition, the Company and Seller each acknowledge the geographic scope of this covenant not to compete to be reasonable. The parties intend that the covenant contained in this Section shall be construed as a series of separate covenants, one for each city, county or political subdivision of each country in the Territory, each of which is deemed to be separately named herein, each for a series of one-year periods within the Period. Except for geographic coverage and periods of effectiveness, each such separate covenant shall be identical in terms. If in any judicial proceeding a court shall refuse to enforce any of the separate covenants deemed included in this Section, then such unenforceable covenant shall be deemed eliminated for the purpose of that proceeding to the extent necessary to permit the remaining separate covenants to be enforced. In the event a court of competent jurisdiction determines that the provisions of this covenant not to compete are excessively broad as to duration, geographic scope or activity, it is expressly agreed that this covenant not to compete shall be construed so that the remaining provisions shall not be affected, but shall remain in full force and effect, and any such over broad provisions shall be deemed, without further action on the part of any person, to be modified, amended and/or limited, but only to the extent necessary to render the same valid and enforceable in such jurisdiction. (b) Seller and the Company each agree with Buyer that the provisions and restrictions contained in this Section are necessary to protect the legitimate continuing interests of Buyer in acquiring the Company, and that any violation or breach of these provisions will result in irreparable injury to Buyer for which a remedy at law would be inadequate. Seller and the Company each agree with Buyer that in the event of a violation or breach and regardless of any other provision contained in this Agreement, Buyer shall be entitled to injunctive and other equitable relief, including without limitation specific performance, as a court may grant after considering the intent of this Section, and Buyer shall not be entitled to any other form of relief from such violation or breach. 7.7 FURTHER TRANSFER MATTERS. Effective on the Closing Date, Seller constitutes and appoints Buyer the true and lawful attorney-in-fact of the Seller, with full power of substitution, in the name of the Seller, but on behalf of and for the sole benefit of Buyer: (i) to demand and receive from time to time any and all of the assets of the Company and to make endorsements and give receipts and releases for and in respect of the same and any part thereof, (ii) to institute, prosecute, compromise and settle any and all actions or proceedings that Buyer may deem proper in order to collect, assert or enforce any claim, right or title of any kind in or to the assets of the Company and (iii) to do all such acts and things in relation to the matters set forth in the preceding clauses (i) through (iii) as Buyer shall deem desirable. Seller hereby acknowledges that the foregoing appointment made and the powers granted are coupled with an interest and are not and shall not be revocable by it in any manner or for any reason. At the Closing, Seller shall provide Buyer with a written power of attorney in form and substance appropriate to carry out the above. 49 ARTICLE VIII TAXES 8.1 TAX INDEMNIFICATION. (a) From and after the Closing Date, to the extent a Tax (i) is imposed on the Company for any Taxable period ending on or before the Closing Date ("PRE-CLOSING PERIOD"), or (ii) is imposed on the Company and relating to (A) the Seller or any affiliate (other than the Company), with respect to any Tax period, (B) any Tax for the Pre-Closing Period for which the Company may be liable under Section 1.1502-6 of the Treasury regulations (or any similar provision of state, local or foreign law), as a transferee or successor or by contract, Seller agrees to pay to the appropriate Taxing Authority the amount of such Tax, plus any additional penalties and interest incurred in the payment of such Tax, and to Buyer an amount sufficient to make such payments be on a Grossed-Up Basis, each within the later of 30 days of receipt of notice of such Tax or final resolution of any dispute relating to such Tax. If such Tax is paid by Buyer or the Company, Seller agrees to reimburse the party paying such Tax the amount of such Tax plus any additional penalties and interest incurred in the payment of such Tax. (b) From and after the Closing Date, to the extent a Tax (other than a Tax described in the first sentence of SECTION 8.1(a)) (i) is imposed on the Company for any Taxable period beginning after the Closing Date ("POST-CLOSING PERIOD") or (ii) is imposed on the Seller or any of its affiliates and relating to the Company for any Post-Closing Period, the Buyer and the Company, jointly and severally, agree to pay the amount of such Tax, plus any additional penalties and interest incurred in the payment of such Tax, to the appropriate Taxing Authority within the later of 30 days of receipt of notice of such Tax or final resolution of any dispute relating to such Tax. If such Tax is paid by Seller, Buyer and the Company, jointly and severally, agree to reimburse the Seller, on a Grossed-Up Basis, the amount of such Tax plus any additional penalties and interest incurred in the payment of such Tax. (c) If Seller, Buyer or the Company receives notice of a Tax properly payable under SECTIONS 8.1(a) and (b) by another party to this Agreement (the "RESPONSIBLE PARTY"), then such recipient shall provide written notice to the Responsible Party within 30 days of having received such notice. (d) Seller shall pay all transfer, real property transfer, stock transfer and other similar Taxes and fees ("TRANSFER TAXES") arising out of or in connection with the transactions effected pursuant to this Agreement, and shall indemnify, defend, and hold harmless Buyer, the Company and their respective affiliates with respect to such Transfer Taxes. Seller shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. (e) No amounts of indemnity shall be payable as a result of a claim under this Section unless and until the party seeking indemnity has suffered, incurred, sustained or become subject to Taxes, interest or penalties in excess of $25,000, in which case such party shall be entitled to seek indemnity for all Taxes, interest or penalties in excess of such $25,000 amount. (f) All rights and obligations of the parties with respect to indemnification under this Section shall survive for the applicable statute of limitations (including any extensions) for the Tax for which such claim of indemnification is based upon. 8.2 PREPARATION AND FILING OF TAX RETURNS. (a) Seller shall file or cause to be filed all Tax Returns of, or that include, the Company for all Pre-Closing Periods. Seller shall pay all Tax liabilities shown by such Tax Returns to be due. In particular, Seller will include the income of the Company for all Pre-Closing Periods on the consolidated federal income Tax Returns of Seller and pay any federal income Taxes attributable to such income. The Company will furnish Tax information to Seller for inclusion in the consolidated federal income Tax Return of Seller for the period that includes the Closing Date in accordance with the past customs and practice of the Company. Seller will allow Buyer an opportunity to review and comment upon such Tax Returns (including any amended Tax Returns) to the extent that they relate to the Company and shall make such revisions to such Tax Returns as are reasonably requested by Buyer. 50 (b) Buyer shall file or cause to be filed all Tax Returns of, or that include, the Company for all Taxable periods ending on or after the Closing Date. With respect to any Tax Return of the Company for a Taxable period that begins on or before the Closing Date and ends after the Closing Date, Buyer shall allow Seller an opportunity to review and comment upon such Tax Returns and shall make such revisions to such Tax Returns as are reasonably requested by Seller. Seller shall pay to Buyer within 15 days after the date on which Taxes are paid with respect to such periods, an amount equal to the portion of such Taxes which relates to the Pre-Closing Period. For purposes of this SECTION 8.2, in the case of any Taxes that are imposed on a periodic basis and are payable for a Taxable period that includes (but does not end on) the Closing Date, the portion of such Tax which relates to the Pre-Closing Period shall (x) in the case of any Taxes other than Taxes based upon or related to income or receipts, be deemed to be the amount of such Tax for the entire Taxable period multiplied by a fraction the numerator of which is the number of days in the Taxable period ending on and including the Closing Date and the denominator of which is the number of days in the entire Taxable period, and (y) in the case of any Tax based upon or related to income or receipts be deemed equal to the amount which would be payable if the relevant Taxable period ended on the Closing Date. Any credits relating to a Taxable period that begins before and ends after the Closing Date shall be taken into account as though the relevant Taxable period ended on the Closing Date. All determinations necessary to give effect to the foregoing allocations shall be made in a manner consistent with prior practice of the Company. Any refund of Taxes (including any interest thereon) that relates to the Company and that is attributable to a Post-Closing Period, shall be the property of the Company and shall be retained by the Company (or, if applicable, promptly paid by Seller to the Company if any such refund is received by Seller or any of its subsidiaries or affiliates). If after the Closing Date, the Company receives a refund of any Tax (including any interest thereon) that relates to, and that was previously paid by or on behalf of the Company and that is attributable to a Pre-Closing Period and such Tax is not described in the previous sentence, then the Company shall promptly pay or cause to be paid to the Seller the amount of such refund together with any interest thereon. Any refund of Taxes (including any interest thereon) that includes but does not end on the Closing Date shall be allocated between the Pre-Closing Period and the Post-Closing Period in accordance with SECTION 8.2(b). 8.3 TAX CONTESTS. (a) If any Taxing Authority or other person asserts a claim with respect to Taxes (a "TAX CLAIM"), then the party hereto first receiving notice of such Tax Claim promptly shall provide written notice thereof to the other party hereto; PROVIDED, HOWEVER, that the failure of a party to give such prompt notice to other party shall not relieve such party failing to provide such notice of any of its obligations under this Article, except to the extent that the receiving party is irreparably prejudiced thereby. Such notice shall specify n reasonable detail the basis for such Tax Claim and shall include a copy of any relevant correspondence received from the Taxing Authority or other person. (b) If within 60 days after receiving a Tax Claim or written notice of such a Tax Claim from the Buyer, Seller notifies the Buyer that Seller desires to defend Buyer with respect to the Tax Claim, then Seller shall have the right to defend or prosecute, at its sole cost, expense and risk, such Tax Claim by all appropriate proceedings, which proceedings shall be defended or prosecuted diligently by Seller; PROVIDED, HOWEVER, Seller shall not, without the prior written consent of Buyer, enter into any compromise or settlement of such Tax Claim that would result in any Tax detriment to any indemnitee; and PROVIDED, FURTHER, that Buyer may, at the sole cost and expense of Buyer, at any time prior to Seller's delivery of the notice referred to in the first sentence of this SECTION 8.3(b) file any motion, answer or other pleadings or take any other action that Buyer reasonably believes to be necessary or appropriate to protect its interests. So long as Seller is defending or prosecuting a Tax Claim, Buyer shall provide or cause to be provided to Seller any information reasonably requested by Seller relating to such Tax Claim, and Buyer shall otherwise cooperate with Seller and its representatives in good faith in order to contest effectively such Tax Claim. Seller shall inform Buyer of all developments and events relating to such Tax Claim (including, without limitation, providing to Buyer copies of all written materials relating to such Tax Claim), and Buyer or its authorized representatives shall be entitled, at the expense of 51 Buyer, to participate in but not control, all conferences, meetings and proceedings relating to such Tax Claim. (c) If Seller fails to notify Buyer within 60 days after receiving a Tax Claim or a written notice of such Tax Claim from Buyer that Seller desires to defend the Tax Claim pursuant to this SECTION 8.3 or, if after delivery of such notice, Seller fails to reasonably defend or prosecute such Tax Claim, then Buyer shall at any time thereafter have the right (but not the obligation) to defend or prosecute, at the sole cost, expense and risk of Buyer, such Tax Claim. Buyer shall have full control of such defense or prosecution and such proceedings, including any settlement or compromise thereof. If requested by Buyer, Seller shall cooperate in good faith with Buyer and its authorized representatives in order to contest effectively such Tax Claim. Seller may participate in, but not control, any defense, prosecution, settlement or compromise of any Tax Claim controlled by Buyer pursuant to this SECTION 8.3(c), and shall bear its own costs and expenses with respect thereto. (d) In the case of any Tax Claim that is defended or prosecuted by Seller pursuant to this SECTION 8.3, Seller shall pay to the Buyer, on a Grossed-Up Basis, the full amount of any Tax arising or resulting form such Tax Claim within 30 days after any final determination of any Tax arising or resulting from such Tax Claim. In the case of any Tax Claim that is defended or prosecuted by Buyer pursuant to this SECTION 8.3, Seller shall pay to the Buyer, on a Grossed-Up Basis, the full amount of any Tax arising or resulting from such Tax Claim, together with any costs or expenses for investigating, defending or prosecuting a Tax Claim including, without limitation, reasonable attorneys', accountants' and experts' fees and disbursements, settlement costs, court costs and any similar costs or expenses ("ASSOCIATED COSTS") that have not theretofore been paid by Seller to Buyer, within 30 days after such final determination. In the case of any Tax Claim not covered by the two preceding sentences, Seller shall pay to the Buyer, on a Grossed-Up Basis, the full amount of any Tax arising or resulting from such Tax Claim, together with any Associated Costs, that have not theretofore been paid by Seller to Buyer, at least five business days before the date payment of such Tax is due from the Seller or the Buyer. 8.4 COOPERATION. Each party hereto shall, and shall cause its subsidiaries and affiliates to, cooperate fully as and to the extent reasonably requested by the other party in connection with filing any Tax Return, amended Tax Return or claim for refund, or in conducting any audit, litigation or other proceeding with respect to Taxes. Such cooperation and information shall include providing copies of all relevant Tax Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by Taxing Authorities and relevant records concerning the ownership and Tax basis of property, which any such party may possess. Each party will retain all Tax Returns, schedules and work papers, and all material records and other documents relating to Tax matters, of the Company for the Tax period first ending after the Closing Date and for all prior Tax periods until the later of (i) the expiration of the statute of limitations of the Tax periods to which the Tax Returns and other documents relate or (ii) eight years following the due date (without extension) for such Tax Returns. Thereafter, the party holding such Tax Returns or other documents may dispose of them; PROVIDED, that such party shall give to the other party the reasonable written notice prior to doing so. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Buyer and Seller further agree, upon request, to use their best efforts to obtain any certificate or other document from any governmental authority or any other person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including but not limited to, with respect to the transactions contemplated hereby). Buyer and Seller further agree, upon request, to provide the other party with all information that either party may be required to report pursuant to Section 6043 of the Code. 8.5 TERMINATION OF TAX SHARING AGREEMENTS. Any and all Tax allocation or sharing agreements or other agreements or arrangements relating to Tax matters between the Company on the one hand and any affiliate of Seller on the other hand shall be terminated with respect to the Company as of the day before the Closing Date and, from and after the Closing Date, the Company shall not be obligated to make any payment to any affiliate of Seller, Taxing Authority or other person pursuant to any such agreement or arrangement for any past or future period. 52 8.6 FIRPTA CERTIFICATES. Seller shall deliver to Buyer on the Closing Date duly executed FIRPTA certificates in customary form. 8.7 CONFLICT. In the event of a conflict between the provisions of this Article and any other provision of this Agreement, the provisions of this Article shall control. 8.8 SURVIVAL. All rights and obligations under this ARTICLE VIII shall survive the Closing and continue until the expiration of the applicable statute of limitations (including tollings and extensions thereto). ARTICLE IX CONDITIONS OF CLOSING 9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations of each party to effect the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Closing Date of the following conditions: (a) NO ORDER. No federal or state governmental or regulatory authority or other agency or commission, or federal or state court of competent jurisdiction, shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which restricts, prevents or prohibits consummation of the transactions contemplated by this Agreement. (b) HART-SCOTT-RODINO ACT. Early termination shall have been granted or applicable waiting periods shall have expired under the HSR Act. (c) ASSET PURCHASE AGREEMENT. Subject to the provisions of SECTION 10.2, the closing of the transactions contemplated by the Asset Purchase Agreement shall occur simultaneously with the transactions contemplated hereby. 9.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to effect the transactions contemplated hereby are also subject to the following conditions: (a) REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties of the Company and Seller contained in this Agreement, including giving effect to any update to the Disclosure Schedule, shall be true and correct in all material respects (except that where any statement in a representation or warranty expressly includes a standard of materiality, such statement shall be true and correct in all respects) as of the Closing Date (except to the extent such representations and warranties speak as of an earlier date) as though made on and as of the Closing Date, and Buyer shall have received a certificate from each of Seller and the Company signed on behalf of Seller and the Company, respectively, by the Chief Executive Officer or President and the Chief Financial Officer of Seller and the Company, respectively, to the foregoing effect. (b) AGREEMENTS AND COVENANTS. The Company shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing Date. (c) CONSENTS OBTAINED. All consents, waivers, approvals, authorizations or orders required to be obtained and all filings required to be made by Seller or the Company for the authorization, execution and delivery of this Agreement and the consummation by it of the transactions contemplated hereby shall have been obtained and made by Seller and the Company, except those for which failure to obtain such approvals or make such filings would not individually or in the aggregate, have a Material Adverse Effect with respect to the Company. (d) NO CHALLENGE. There shall not be pending any action, proceeding or investigation before any court or administrative agency or by a government agency (i) challenging or seeking material damages in connection with, the transactions hereby contemplated or (ii) seeking to restrain, prohibit or limit the exercise of full rights of ownership or operation by Buyer of all or any portion of the Company, or (iii) seeking to recover against the proceeds of the transactions contemplated hereby, which in any case is reasonably likely to have a Material Adverse Effect with respect to the Company. 53 (e) NO MATERIAL ADVERSE CHANGES. Since the date of this Agreement, there shall not have been any change in the financial condition, results of operations or business of the Company or the Company, taken as a whole, that either individually or in the aggregate would have a Material Adverse Effect with respect to the Company. Buyer shall have received a certificate of the Chief Executive Officer or President and the Chief Financial Officer of the Company to that effect. (f) OPINION OF COUNSEL. Buyer shall have received from Jenkens & Gilchrist, a Professional Corporation, independent counsel to the Company ("COMPANY'S COUNSEL"), an opinion dated the Closing Date, substantially in the form attached as EXHIBIT B. (g) FINANCING AND EMPLOYMENT RELEASES. Buyer shall have received releases or other documentation in form reasonably satisfactory to Buyer evidencing the satisfaction of obligations of the Company under or pursuant to the Credit Agreement. (h) REAL PROPERTY MATTERS. With respect to each Real Property Lease containing a provision that grants the lessor thereunder any rights of termination or consent as a result of the transaction contemplated hereby, Buyer shall have received an estoppel certificate and consent (dated not more than 30 days prior to the Closing Date) where such estoppel certificate and consent are required from each landlord under each such Real Property Lease reasonably acceptable in form to Buyer. (i) BRIGHTON MATTERS. With reference to the Seller's obligations under SECTION 6.1(j), (i) Seller shall have notified Buyer of all third party claims in accordance with SECTIONS 6.1(j) and 12.2 and (ii) Seller shall have provided its insurance carrier with a written notification notifying such carrier of the Incident and shall have provided Buyer with a copy of such notification. 9.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligations of Seller to effect the transactions contemplated hereby are also subject to the following conditions: (a) REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties of Buyer set forth in this Agreement, including giving effect to any update to the Buyer Disclosure Schedule, shall be true and correct in all material respects (except that where any statement in a representation or warranty expressly includes a standard of materiality, such statement shall have been true and correct in all respects) as of the Closing Date (except to the extent such representations and warranties speak as of an earlier date), as though made on and as of the Closing Date, and Seller shall have received a certificate signed on behalf of Buyer by the Chief Executive Officer or President and the Chief Financial Officer of Buyer to the foregoing effect. (b) AGREEMENTS AND COVENANTS. Buyer shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing Date. (c) CONSENTS UNDER AGREEMENTS. All consents, waivers, approvals, authorizations or orders required to be obtained, and all filings required to be made by Buyer for the authorization, execution and delivery of this Agreement and the consummation by it of the transactions contemplated hereby shall have been obtained and made by Buyer, except where failure to obtain any consents, waivers, approvals, authorizations or orders required to be obtained or any filings required to be made would not have a Material Adverse Effect with respect to Buyer. (d) NO CHALLENGE. There shall not be pending any action, proceeding or investigation before any court or administrative agency or by a government agency (i) challenging or seeking material damages in connection with, transactions hereby contemplated or (ii) seeking to restrain, prohibit or limit the exercise of full rights of ownership or operation by Buyer of all or any portion of the Company, which in either case would have a Material Adverse Effect with respect to the Company. (e) NO MATERIAL ADVERSE CHANGES. Since the date of this Agreement, there has not been any change in the financial condition, results of operations or business of Buyer, taken as a whole, that either individually or in the aggregate would have a Material Adverse Effect with respect to Buyer. Seller shall have received a certificate of the Chief Executive Officer or President and the Chief Financial Officer of Buyer to that effect. 54 (f) OPINION OF COUNSEL. Seller shall have received from Morgan, Lewis & Bockius LLP, independent counsel to Buyer ("BUYER COUNSEL"), an opinion dated the Closing Date, substantially in the form attached hereto as EXHIBIT C. (g) REGISTRATION RIGHTS AGREEMENT. Seller shall have received from Buyer a Registration Rights Agreement, substantially in the form attached hereto as EXHIBIT D. ARTICLE X TERMINATION, AMENDMENT AND WAIVER 10.1 TERMINATION. This Agreement may be terminated at any time prior to the Closing Date: (a) by mutual consent of Buyer and Seller; (b) by either Seller or Buyer if any approval of stockholders required for the consummation of the transactions contemplated hereby shall not have been obtained by reason of the failure to obtain the required vote at a duly held meeting of such stockholders or at any adjournment or postponement thereof; (c) by Seller or Buyer if there has been a breach in any material respect (except that where any statement in a representation or warranty expressly includes a standard of materiality, such statement shall have been breached in any respect) of any representation or warranty, or the material nonfulfillment of any covenant or agreement, set forth in this Agreement, on the part of any party, which breach has not been cured within 10 business days following receipt by the nonterminating party of notice of such breach or other condition, or which breach or nonfulfillment by its nature, cannot be cured prior to the Closing Date; PROVIDED, HOWEVER, this Agreement may not be terminated pursuant to this clause (c) by the breaching party; (d) by either Buyer or Seller if any permanent injunction preventing the consummation of the transactions contemplated hereby shall have become final and nonappealable or if any applicable Law or any rule or regulation thereunder shall hereafter be enacted or becomes applicable that makes the transactions contemplated hereby or the consummation of the Closing illegal; (e) subject to the provisions of SECTION 10.2 below, by either Buyer or Seller if the transactions contemplated hereby shall not have been consummated by July 31, 1999, for a reason other than the failure of the party seeking termination to comply with its obligations under this Agreement; PROVIDED, HOWEVER, that in the event early termination shall not have been granted or applicable waiting periods shall not have expired under the HSR Act as of such date, the parties may agree to extend such date for up to two additional 30 day periods, with such agreement not to be unreasonably withheld; (f) by either Buyer or Seller if any regulatory authority has denied approval of the transactions contemplated hereby, and neither Buyer nor Seller has, within 30 days after the entry of such order denying approval, filed a petition seeking review of such order as provided by applicable law; or (g) by Buyer in the event it shall have notified Seller of its intention to terminate this Agreement pursuant to SECTION 7.7 within the time period set forth therein. 10.2 EFFECT OF TERMINATION; PUT RIGHT. In the event of the termination of this Agreement pursuant to SECTION 10.1, this Agreement shall forthwith become void and all rights and obligations of any party shall cease except as set forth in SECTION 6.4(c) of this Agreement; PROVIDED, HOWEVER, nothing herein shall relieve any party from liability for any willful breach of this Agreement or shall restrict either party's rights in the case thereof. At any time after July 31, 1999, provided that approval under the HSR Act has not been obtained, Seller may elect to pay to Buyer a termination fee of five million U.S. dollars (US $5,000,000) (the "BREAK UP FEE"). The Break up fee shall be payable by Seller to Buyer by wire transfer of immediately available funds, to such account as Buyer shall designate in writing to Seller, not later than five business days following the date of such election. If Seller makes such election and the Break up fee is paid as herein provided, the parties shall thereupon proceed to close the transaction contemplated by, and on the terms and conditions provided for in, the Asset Purchase Agreement; PROVIDED, HOWEVER, and notwithstanding the earlier close of the Asset Purchase Agreement, in the 55 event regulatory approval has not been denied and Buyer desires to close the transactions herein contemplated at a mutually agreeable date as provided in SECTION 10.1(E), Seller shall cooperate with Buyer in such effort and, upon receipt of any required regulatory approvals, shall close the transactions herein contemplated on the terms and conditions herein provided. 10.3 WAIVER. At any time prior to the Closing Date, the parties may (a) extend the time for the performance of any of the obligations or other acts of the other party, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. ARTICLE XI INDEMNIFICATION 11.1 INDEMNIFICATION. Subject to the provisions of this Article, Seller shall indemnify Buyer, its stockholders, employees, agents and affiliates (collectively, the "BUYER INDEMNITEES") in respect of, and hold each of them harmless from and against, and shall pay the full amount of, on a Grossed-Up Basis (as defined in SECTION 12.3), any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject resulting from, arising out of or relating to: (i) any causes of action asserted or other legal proceedings initiated on the part of any of the stockholders of Seller relating in any way to claims based on the sale of Seller's assets; (ii) any employee pension benefit plan subject to Title IV of ERISA that is maintained by Seller or any of its "controlled group," within the meaning of Section 4001(a)(15) of ERISA, other than any Plans; (iii) severance obligations occurring within six months of the Closing Date in connection with the agreements described on EXHIBIT E; (iv) the nonfulfillment of or failure to perform any covenant or agreement on the part of Seller contained in SECTION 6.6 and SECTION 8.1 (provided that the parties agree that no double recovery shall occur or be permitted); and (v) any claims by a governmental entity including, but not limited to, the United States Environmental Protection Agency, the State of Colorado and the City of Brighton, relating to, resulting from or arising out of the Incident including, but not limited to, any such claims associated with the investigation, monitoring or remediation of Hazardous Materials, the replacement of manholes and the replacement of sewer lines and any related claims for subrogation and/or indemnification (hereinafter "BRIGHTON GOVERNMENTAL CLAIMS"). 11.2 PROCEDURES FOR INDEMNIFICATION. Any claims for indemnification by any party entitled to indemnification hereunder (an "INDEMNIFIED PARTY") from any party hereunder (an "INDEMNITOR") under this ARTICLE XI shall be made by an Indemnified Party by delivery of a written notice to the Indemnitor requesting indemnification (an "INDEMNIFICATION CLAIM") and specifying the basis on which indemnification is sought and the amount of asserted Losses. Indemnitor shall have 30 days after the date on which the Indemnitor receives the notice of an Indemnification Claim to object to such Indemnification Claim by delivery of a written notice of such objection to the Indemnified Party specifying in reasonable detail the basis for such objection. If within 30 days after the date on which the Indemnitor receives the notice of the Indemnification Claim, the Indemnitor has not delivered to the Indemnified Party a notice objecting to all or any portion of the claimed Loss and setting forth the amount of such claimed indemnification for such Loss objected to and the reasons for such objection, the Indemnified Party shall be entitled to indemnification for such Loss, and the Indemnitor shall promptly pay the full amount of such Loss. If, within 30 days after the date on which the Indemnitor receives the notice of an Indemnification Claim, the Indemnitor delivers to the Indemnified Party an objection to all or any portion of the claimed Loss, setting forth the amount of such Loss objected to and the reasons for such objection, the Indemnified Party shall be entitled to reimbursement for the portion of such Loss not objected to by the Indemnitor and the Indemnitor shall promptly pay the full amount of so much of the Loss as to which the Indemnitor did not object. (a) Upon determination of the amount of an Indemnification Claim, whether by agreement between the Indemnitor and the Indemnified Party or by any final adjudication, the Indemnitor shall pay the amount of such Indemnification Claim within 5 days of the date such amount is determined. 56 (b) The rights accorded to Indemnified Parties hereunder shall be in addition to any rights that any Indemnified Party may have at law or in equity. (c) Any payment under this Article shall be treated for Tax purposes as an adjustment of the Purchase Price to the extent such characterization is proper and permissible under the applicable U.S. Tax law, including the Code, Treasury regulations, court decisions and administrative promulgations or, alternatively, by Buyer as an offset to a Tax benefit item, if such characterization is permissible under such Tax law. (d) In no event shall the aggregate liability of Seller for claims asserted pursuant to Section 11.1(i) and (iii) of this Agreement and Section 9.1 (i) and (iii) of the Asset Purchase Agreement (excluding indemnification with respect to the payment of Taxes, penalties, Brighton Governmental Claims, interest and collection costs thereof) exceed $700,000. (e) Seller's obligation to indemnify Buyer under SECTION 11.1(v) above shall terminate on the date which is the earlier of: (i) Buyer's receipt of evidence that is satisfactory to the Buyer that all actual or potential Brighton Governmental Claims have been resolved, or (ii) expiration of the applicable statutes of limitation. ARTICLE XII GENERAL PROVISIONS 12.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS. Except as otherwise set forth herein, the representations and warranties of the parties shall expire at Closing. The covenants and agreements of the parties shall expire at Closing; PROVIDED, HOWEVER, that the covenants and agreements contained in SECTIONS 6.4(c), 6.6, 6.7, 7.2, 7.6, ARTICLE VIII and 10.2 shall survive the Closing and expire in accordance with their respective terms, provided that to the extent obligations require repeated performance or performance from time to time, expiration shall occur only upon the final performance of the obligations; and provided further that Seller's obligation to indemnify Buyer under SECTION 11.1(v) above shall survive the Closing and terminate on the date provided in SECTION 11.2(e). 12.2 NOTICES. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed given if delivered personally, telecopied (with confirmation), mailed by certified 57 mail (postage prepaid, return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice) and shall be effective upon receipt:
(a) If to Seller or the Company: Spinnaker Industries, Inc. 1700 Pacific Ave., Suite 1600 Dallas, Texas 75201 Telecopier: (214) 855-0093 Attention: President With copies to: Jenkens & Gilchrist, a Professional Corporation 1445 Ross Ave., Suite 3200 Dallas, Texas 75202 Telecopier: (214) 855-4300 Attention: Ronald J. Frappier Crouch & Hallett, L.L.P. 717 North Harwood Street Suite 1400 Dallas, Texas 75201 Telecopier: (214) 922-4193 Attention: Timothy R. Vaughan (b) If to Buyer: Intertape Polymer Group Inc. 110E Montee de Liesse St. Laurent, Quebec H4T IN4 Canada Telecopier: (514) 731-5477 Attention: Andrew M. Archibald With a copy to: Morgan, Lewis & Bockius LLP 101 Park Avenue New York, NY 10178 Telecopier: (212) 309-6273 Attention: Nancy H. Corbett
12.3 CERTAIN DEFINITIONS. For purposes of this Agreement, the term: (a) "AFFILIATE" means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned person; including, without limitation, any partnership or joint venture in which any person (either alone, or though or together with any other subsidiary) has, directly or indirectly, an interest of 5% or more. (b) "BUSINESS DAY" means any day other than a day on which federally-chartered banks are required or authorized to be closed. (c) "CONTROL" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of stock or as trustee or executor, by contract or credit arrangement or otherwise. 58 (d) "GROSSED-UP BASIS" means, when used to describe the basis on which the payment of a specified sum is to be made, a basis such that the amount of such payment, after being reduced by the amount of all Taxes imposed on the recipient of such payment as a result of the receipt or accrual of such payment and after taking into account the Tax benefit of any deductions attributable to such Taxes and/or payments that are currently available to the recipient of such payment, will equal the specified sum. (e) "LAW" shall have the meaning set forth in SECTION 3.4. (f) "LIEN" shall mean any conditional sale agreement, default of title, easement, encroachment, encumbrance, hypothecation, infringement, lien, mortgage, pledge, reservation, restriction, security interest, title retention or other security arrangement, or any adverse right or interest, charge, or claim of any nature whatsoever of, on, or with respect to any property or property interest, other than (i) liens for current property Taxes not yet due and payable, and (ii) liens which do not materially impair the use of, or title to, or value of the assets subject to such lien. (g) "LOSS" shall mean any and all demands, claims, actions or causes of action, assessments, damages, liabilities, costs and expenses, including interest, penalties, costs of environmental investigation, remediation and monitoring and defense, and reasonable attorneys' fees, environmental consultants fees and other professional fees, and expenses relating thereto (but excluding lost profits or consequential or incidental damages). (h) "MATERIAL ADVERSE EFFECT" means, with respect to Buyer, Seller, the Company or Company, (i) any adverse effect on the business, assets, properties, liabilities, prospects, results of operations or financial condition of, and which is material with respect to, such party (or the Company), or (ii) any effect that materially impairs the ability of such party to consummate the transactions contemplated hereby; PROVIDED, HOWEVER, that Material Adverse Effect shall not be deemed to include the impact of (A) actions contemplated by this Agreement, (B) changes in laws and regulations or interpretations thereof that are generally applicable to the manufacturing industry and (C) changes in generally accepted accounting principles that are generally applicable to the manufacturing industry. (i) "PERSON" means an individual, corporation, partnership, association, trust, unincorporated organization, other entity or group (as defined in Section 13(d) of the Exchange Act); and (j) "SUBSIDIARY" or "SUBSIDIARIES" of the Company, Seller, Buyer or any other person, means any corporation, partnership, joint venture or other legal entity of which either the Company, Seller, Buyer, or such other person, as the case may be (either alone or through or together with any other subsidiary), owns, directly or indirectly, 50% or more of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. 12.4 HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 12.5 SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. 12.6 ENTIRE AGREEMENT. This Agreement and the letter agreement dated as of the date hereof regarding Tax loss carryforwards constitute the entire agreement of the parties and supersedes all prior agreements and undertakings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof and, except as otherwise expressly provided herein, are not intended to confer upon any other person any rights or remedies hereunder. 59 12.7 ASSIGNMENT. This Agreement shall not be assigned by operation of law or otherwise, except that Buyer may assign all or any of its rights hereunder to any affiliate provided that no such assignment shall relieve Buyer of its obligations hereunder. 12.8 PARTIES IN INTEREST. This Agreement shall be binding upon and inure solely to the benefit of each party and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 12.9 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law. 12.10 COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by the different parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 12.11 TIME IS OF THE ESSENCE. Time is of the essence with respect to this Agreement. 12.12 AMENDMENT. This Agreement may be amended by the agreement in writing of the parties and in accordance with their applicable charter documents and applicable Law. 12.13 WAIVER OF JURY TRIAL. Each of Seller and Buyer waive their respective rights to a trail by jury of any claim or cause of action based upon or arising out of or related to this agreement, any assignment or the transactions contemplated hereby, in any action, proceeding or other litigation of any type brought by any party against the other parties, whether with respect to contract claims, tort claims, or otherwise. Each of Seller and Buyer agree that any such claim or cause of action shall be tried by a court trial without a jury. Without limiting the foregoing, the parties further agree that their respective right to a trial by jury is waived by operation of this Section as to any action, counterclaim or other proceeding which seeks, in whole or in part, to challenge the validity or enforceability of this Agreement, any assignment or any provision hereof or thereof. This waiver shall apply to any subsequent amendments, renewals, supplements or modifications to this Agreement or any assignment. 12.14 CONSENT TO JURISDICTION. The parties hereto each hereby irrevocably submit to the exclusive jurisdiction of the state courts of the State of Delaware and to the jurisdiction of the United States District Court of Delaware for the purposes of any suit, action or other proceeding arising out of or based upon this Agreement or the subject matter hereto brought by any other party hereto. Each party hereto, to the extent permitted by applicable law, hereby waives and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding brought in such courts, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such Court. IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. SPINNAKER INDUSTRIES, INC. ("Seller") By: /s/ Ned M. Fleming, III Name: Ned M. Fleming, III Title: President INTERTAPE POLYMER GROUP INC. ("Buyer") By: /s/ Andrew M. Archibald Name: Andrew M. Archibald Title: CFO, Vice President Administration 60 EX-2.3 7 EXHIBIT 2.3 EXHIBIT 2.3 ASSET PURCHASE AGREEMENT BY AND AMONG SPINNAKER ELECTRICAL TAPE COMPANY, SPINNAKER INDUSTRIES, INC. AND INTERTAPE POLYMER GROUP INC. DATED AS OF APRIL 9, 1999 61 TABLE OF CONTENTS
PAGE ARTICLE I -- SALE OF ASSETS AND ASSUMPTION OF LIABILITIES.............. 64 1.1 Sale of Assets by Seller.................................... 64 1.2 Excluded Assets............................................. 66 1.3 Assumed Liabilities......................................... 66 1.4 Excluded Liabilities........................................ 66 1.5 Time and Place of Closing................................... 67 ARTICLE II -- PURCHASE PRICE........................................... 67 2.1 Purchase Price.............................................. 67 2.2 Allocation of Purchase Price................................ 67 ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF THE SELLER............ 68 3.1 Organization; Approvals..................................... 68 3.2 Certificate of Incorporation and Bylaws..................... 68 3.3 Authority................................................... 68 3.4 No Conflict; Required Filings and Consents.................. 68 3.5 Compliance; Permits......................................... 69 3.6 Inventory................................................... 69 3.7 Accounts Receivable......................................... 69 3.8 Financial Statements........................................ 69 3.9 Absence of Certain Changes or Events........................ 70 3.10 Absence of Litigation....................................... 70 3.11 Employee Benefit Plans...................................... 70 3.12 Labor and Employment Matters................................ 71 3.13 Tangible Personal Property.................................. 72 3.14 Environmental Matters....................................... 72 3.15 Absence of Agreements....................................... 73 3.16 Taxes....................................................... 73 3.17 Insurance................................................... 74 3.18 Brokers..................................................... 74 3.19 Material Contracts.......................................... 74 3.20 Substantial Customers and Suppliers......................... 74 3.21 Intellectual Property....................................... 74 3.23 Year 2000 Representation.................................... 76 3.24 Real Property............................................... 76 3.25 Disclosure.................................................. 76 3.26 Material Adverse Effect..................................... 76 ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF BUYER.................. 77 4.1 Organization; Approvals..................................... 77 4.2 Authority................................................... 77 4.3 No Conflict; Required Filings and Consents.................. 77 4.4 Absence of Litigation....................................... 77 4.5 Brokers..................................................... 78 4.6 Disclosure.................................................. 78 ARTICLE V -- CERTAIN COVENANTS......................................... 78 5.1 Affirmative Covenants....................................... 78 5.2 Negative Covenants.......................................... 79 5.3 Exclusivity................................................. 79 5.4 Access and Information...................................... 80 5.5 Update Disclosure; Breaches................................. 80 5.6 Expenses.................................................... 81
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PAGE 5.7 Retention of Records........................................ 81 ARTICLE VI -- ADDITIONAL AGREEMENTS.................................... 81 6.1 Appropriate Action; Consents; Filings....................... 81 6.2 Employee Benefit Matters.................................... 81 6.3 Notification of Certain Matters............................. 82 6.4 Public Announcements........................................ 83 6.5 Customer Retention.......................................... 83 6.6 Tax Cooperation and Indemnification......................... 83 6.7 Bulk Transfer Laws.......................................... 84 6.8 Non-Competition............................................. 84 6.9 Further Transfer Matters.................................... 86 6.10 Prorations.................................................. 86 6.11 Release of Liens............................................ 86 ARTICLE VII -- CONDITIONS OF CLOSING................................... 86 7.1 Conditions to Obligation of Each Party...................... 86 7.2 Additional Conditions to Obligations of Buyer............... 86 7.3 Additional Conditions to Obligations of the Seller.......... 88 ARTICLE VIII -- TERMINATION, AMENDMENT AND WAIVER...................... 88 8.1 Termination................................................. 88 8.2 Effect of Termination....................................... 89 8.3 Waiver...................................................... 89 ARTICLE IX -- INDEMNIFICATION.......................................... 89 9.1 Indemnification............................................. 89 9.2 Procedures for Indemnification.............................. 90 ARTICLE X -- GENERAL PROVISIONS........................................ 91 10.1 Survival of Representations, Warranties, Covenants and Agreements.................................................. 91 10.2 Notices..................................................... 91 10.3 Certain Definitions......................................... 92 10.4 Headings.................................................... 92 10.5 Severability................................................ 92 10.6 Entire Agreement............................................ 93 10.7 Assignment.................................................. 93 10.8 Parties In Interest......................................... 93 10.9 Governing Law; Venue........................................ 93 10.10 Counterparts................................................ 93 10.11 Time Is of the Essence...................................... 93 10.12 Amendment................................................... 93 10.13 Waiver of Jury Trial........................................ 93 10.14 Consent to Jurisdiction..................................... 93
63 ASSET PURCHASE AGREEMENT This Asset Purchase Agreement (this "AGREEMENT"), dated as of April 9, 1999, by and among Spinnaker Electrical Tape Company, a Delaware corporation ("SELLER"), Spinnaker Industries, Inc., a Delaware corporation ("Parent"), and Intertape Polymer Group Inc., a corporation organized under the Canada Business Corporations Act ("BUYER"). WITNESSETH: WHEREAS, Seller is engaged in the business of the design, development, manufacture and sale of industrial tapes (the "BUSINESS"); and WHEREAS, Buyer desires to acquire from Seller the Business through a purchase of certain of the assets of Seller, and Seller desires to sell, assign, transfer, convey and deliver to Buyer, on the terms and subject to the conditions of this Agreement, all of its rights, title and interest in, or to, all of the assets, rights, properties, claims and contracts owned or used by Seller in the conduct of the Business and, in connection therewith, Buyer has agreed to assume certain liabilities of Seller relating to the Business, all on the terms set forth in this Agreement; and WHEREAS, concurrently with the execution and delivery of this Agreement, Buyer is entering into an agreement of even date herewith (the "STOCK PURCHASE AGREEMENT") with Parent, pursuant to which Parent shall sell to Buyer, and Buyer shall purchase and acquire from Parent, all of the capital stock of Central Products Company, a Delaware corporation ("CPC") and an affiliate of Seller engaged in the business of the design, development, manufacture and sale of industrial tapes. NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties and agreements contained in this Agreement, and subject to the terms and conditions set forth in this Agreement, the parties agree as follows: ARTICLE I SALE OF ASSETS AND ASSUMPTION OF LIABILITIES 1.1 SALE OF ASSETS BY SELLER. Subject to the satisfaction or waiver of the conditions set forth in this Agreement, at the Closing (as defined in SECTION 1.5), Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase and accept from Seller, all of the following assets associated with the Business (but excluding the Excluded Assets described in SECTION 1.2) (collectively, the "PURCHASED ASSETS"): (a) REAL PROPERTY. All of the parcels of real property used, occupied or operated by Seller in connection with the Business described in SCHEDULE 1.1(a) (the "REAL PROPERTY"), and all of the rights arising out of the ownership of the Real Property or appurtenant thereto, together with all buildings, structures, facilities, fixtures and other improvements to the Real Property (together with such Real Property, the "FACILITIES"); (b) LEASED PROPERTY. All leases, including capitalized leases, for real property leased or used by Seller in connection with the Business described in SCHEDULE 1.1(b) (the "REAL PROPERTY LEASES"); (c) PERSONAL PROPERTY LEASES. All leases, including capitalized leases, for personal property leased or used by Seller in connection with the Business, including without limitation those described in SCHEDULE 1.1(c) (the "PERSONAL PROPERTY LEASES"); (d) MACHINERY AND EQUIPMENT. The machinery, equipment, computer hardware, tooling, office equipment, telephone, telecopy and communications equipment, furniture and other items of tangible personal property owned or licensed (to the extent transferable) by Seller that are used in connection with the Business and all leasehold improvements (to the extent of Seller's interest therein) the principal items of which as of December 31, 1998 are listed in SCHEDULE 1.1(d) (the "EQUIPMENT"), and all warranties and guarantees, if any, express or implied, existing for the benefit of Seller in connection with the Equipment (to the extent transferable); 64 (e) INVENTORY. The finished products and all work-in-progress, raw materials, waste materials, scrap, samples, stores and spares, components, goods in transit from suppliers or manufacturers, goods held on consignment by any third party for Seller (excluding goods held on consignment for any third party by Seller), supplies, and packaging and promotional materials used in connection therewith, owned by Seller on the Closing Date, together with all rights of Seller against suppliers that relate to the Purchased Assets (the "INVENTORY"); (f) VEHICLES. All motor vehicles owned or leased by Seller in connection with the operation of the Business, including without limitation those described in SCHEDULE 1.1(f); (g) INTELLECTUAL PROPERTY. All right, title and interest of Seller in and to any and all Intellectual Property (as defined in SECTION 3.22) used by Seller in connection with the Business or being developed by Seller in connection with the Business as of the Closing Date, including without limitation the Intellectual Property described in SCHEDULE 1.1(g); (h) BUSINESS INFORMATION AND FILES. Any and all business information, market research studies, customer lists, customer records and information, supplier lists, technical manuals, specifications, data, designs, blueprints and drawings, technical papers, sales and promotional materials, catalogs, advertising and marketing materials and related books, records and files currently used by Seller in connection with the Business, but excluding such information that is related to the sale of the Business; (i) CONTRACTS. To the extent transferable, all commitments, orders, quotations, bids, supply agreements, procurement agreements, service agreements, contracts and agreements, written or oral, to which Seller is a party or by which Seller is bound (the "CONTRACTS"); (j) ACCOUNTS RECEIVABLE. All accounts receivable of the Business owned by Seller and reflected on the books and records of Seller as of the Closing Date; (k) SECURITY DEPOSITS. All security deposits deposited by or on behalf of Seller as lessee or sublessee under any lease included in the Business and other transferable deposits; (l) LICENSES, CERTIFICATIONS AND PERMITS. To the extent transferable, the licenses, permits, certificates of authority, authorizations, approvals, registrations, franchises and similar consents granted or issued by any governmental or regulatory authority to Seller, including without limitation those set forth in SCHEDULE 1.1(l) (the "PERMITS"); (m) CORPORATE NAMES, TRADE NAMES, ETC. The use of the name "Spinnaker Electrical Tape Company," including the goodwill attached to such name, and the trade names and marks descriptive of and associated with such name for a period not to exceed nine months; (n) BANK ACCOUNTS, CASH, ETC. All cash, checks, negotiable instruments, short-term investments, bank accounts, deposits, securities, investments (and all interest thereon, to the extent applicable) and all other cash equivalents of Seller; (o) BOOKS AND RECORDS. All written or recorded information used by Seller in connection with the Business, including without limitation employee payroll and personnel records and customer lists, credit information, supplier lists and all books and records containing purchasing, sales, marketing and advertising information of the Business, or relating to the Purchased Assets or Assumed Liabilities (as defined in SECTION 1.3); (p) INSURANCE POLICIES. To the extent assignable, any insurance policy, bonds, or other similar items, or any cash surrender value in regard thereof, or any security or other deposits, and all insurance proceeds received by Seller, or rights to receive insurance proceeds, to the extent any of the foregoing relate to damage to any item of personalty or realty or property of the Business which has suffered damage or becomes damaged between the date of this Agreement and the Closing Date, except to the extent such proceeds were utilized to repair any such damaged item; and (q) CAUSES OF ACTION. All causes of action and other claims of Seller of every kind or description which Seller may have against any person or entity arising out of or relating to the Purchased Assets and the 65 Assumed Liabilities (both relating to periods on or after the Closing Date, except with respect to claims relating to product warranties assumed hereunder, which relate to all periods); in each case as of the Closing Date, subject to changes made from the date of this Agreement to the Closing Date and reflected on appropriate updated Schedules, as applicable. To the extent assets are used by Parent in connection with the Business and its other businesses, the parties shall use good faith efforts to separate such assets in accordance with their respective uses. 1.2 EXCLUDED ASSETS. Notwithstanding any other provision of this Agreement, the following assets of Seller are excluded from the sale and shall not be sold, assigned, transferred, conveyed or delivered by Seller to Buyer, and Buyer shall not acquire any of Seller's right, title or interest therein (such assets collectively, the "EXCLUDED ASSETS"): (a) TAX REFUNDS. Any refunds, credits or other assets or rights (including interest thereon or claims therefor) with respect to any Taxes (as defined in SECTION 3.16) of Seller; (b) CAUSES OF ACTION. All causes of action and other claims of every kind or description that Seller may have against any person or entity arising out of or relating to (i) the Excluded Assets or the Excluded Liabilities (as defined below) and (ii) the Purchased Assets or Assumed Liabilities (as defined below) (in the case of (ii) relating to periods prior to the Closing Date); (c) INTERCOMPANY RECEIVABLES. All intercompany receivables of Seller; and (d) OTHER EXCLUDED ASSETS. Such other specific assets used in the Business as are listed in SECTION 1.2(c) of the Seller Disclosure Schedule. 1.3 ASSUMED LIABILITIES. Buyer shall assume the following liabilities of the Seller (the "ASSUMED LIABILITIES"): (a) all obligations under the terms of any outstanding warranty (except those relating to any Excluded Asset); (b) liabilities arising on and after the Closing Date (except as otherwise herein expressly agreed) under the Contracts, the Real Property Leases, the Personal Property Leases and other assets included in the Purchased Assets; (c) all liabilities for accounts payable and accrued and unpaid expenses of the Business; (d) all insurance claims, including without limitation automobile liability, general liability and casualty claims, made on or after the Closing Date relating to the Purchased Assets or Assumed Liabilities, except as provided in SECTION 1.4(g); (e) all liabilities of Seller pursuant to that collective bargaining agreement between Seller and the Laborers' International Union of North America, AFL-CIO, Local No. 994, effective from March 7, 1998 through March 2, 2001; (f) all liabilities arising from the ownership of the Purchased Assets on and after the Closing Date; (g) liabilities relating to the Plans (as defined in SECTION 3.11(a)), but only to the extent provided in SECTION 6.2; and (h) liabilities relating to all causes of action and other claims which a third party may assert in respect of any of the Purchased Assets (but only to the extent such causes of action or claims relate to liabilities assumed hereunder). 1.4 EXCLUDED LIABILITIES. Seller shall retain and Buyer shall not assume any liabilities or obligations (other than the Assumed Liabilities) of Seller with respect to the Business, whether known or unknown, fixed or contingent, including without limitation the following obligations or liabilities, as well as the liabilities in SECTION 1.4 of the Seller Disclosure Schedule (the "EXCLUDED LIABILITIES"): (a) all obligations and liabilities arising out of or relating to the Excluded Assets; 66 (b) all financial indebtedness of Seller and any liabilities of Seller arising under any agreement for borrowed money, including without limitation, pursuant to any of the following (but exclusive of any capitalized leases, which shall be Assumed Liabilities): (i) the Credit Agreement by and among Seller and the other parties thereto dated as of July 30, 1998 (the "TESA CREDIT FACILITY"); (ii) the Nonnegotiable Subordinated Promissory Note dated as of July 30, 1998 issued by Seller in the original principal amount of $500,000 (the "TESA NOTE"); and (c) all intercompany debt; (d) all liabilities of Seller, Parent or any affiliate of Parent for Taxes accruing prior to the Closing Date and Taxes relating to the conduct of the Business prior to the Closing Date; (e) all other liabilities of the Business not expressly included in the Assumed Liabilities, including all liabilities of either Parent or Seller in connection with the Business arising under or pursuant to Environmental Laws (as defined in SECTION 3.14) arising from events occurring prior to the Closing Date; (f) all overdrafts; (g) except as expressly provided herein, all liabilities relating to the employment by Seller of any employee, agent, contractor or consultant, or the termination of such employment prior to the Closing Date, including liabilities for compensation and benefits (except, as to the Plans, to the extent provided in SECTION 6.2); and (h) all liabilities relating to, resulting from or arising out of employee exposure to Hazardous Materials in excess of applicable Occupational, Safety and Health Administration Act and analogous state law standards and/or requirements at the Carbondale, Illinois facility ("CARBONDALE") as of or prior to the Closing Date. 1.5 TIME AND PLACE OF CLOSING. The closing of the transactions contemplated hereby (the "CLOSING") will take place on the Closing Date (defined below), or at such other time as the parties agree. The Closing shall be held at the law offices of Morgan, Lewis & Bockius LLP located at 101 Park Avenue, New York, New York 10178 or such location as may be agreed upon by the parties. The parties shall use reasonable efforts to cause the Closing to occur on the first business day following the later to occur of (i) the effective date (including expiration of any applicable waiting period) of the last required consent of any regulatory authority having authority over and approving or exempting the contemplated transaction or (ii) after all the remaining conditions set forth in ARTICLE VII are satisfied or waived (the "CLOSING DATE"). ARTICLE II PURCHASE PRICE 2.1 PURCHASE PRICE. The aggregate purchase price for the Business shall be (i) Twenty-Three Million United States Dollars (US $23,000,000) (the "CASH PURCHASE PRICE") and (ii) the assumption by Buyer of the Assumed Liabilities (collectively, the "PURCHASE PRICE"). The Cash Purchase Price shall be made to Seller at Closing by wire transfer in immediately available federal funds to an account designated by Seller by written notice to Buyer at least two days prior to the Closing Date. The portion of the Purchase Price allocable to the non-competition provision of SECTION 6.8 shall be US $3,000,000. 2.2 ALLOCATION OF PURCHASE PRICE. (a) Within sixty (60) days following the Closing Date, Buyer shall prepare and deliver to Seller and Parent an allocation of the Purchase Price (set forth as provided in SCHEDULE 2.2) among asset classes as specified by Section 1060 of the Code and the Treasury regulations thereunder (the "NOTICE OF ALLOCATION"). This allocation shall be binding upon Seller unless Seller shall provide a written notice of objection within fifteen (15) days after receipt of the Notice of Allocation in which event Seller and Buyer shall negotiate in good faith to resolve such dispute as expeditiously as possible. Buyer and Seller 67 agree that such allocation is in accordance with the rules in Section 1060 of the Code and the Treasury regulations promulgated thereunder. Buyer and Seller recognize that the Purchase Price does not include Buyer's acquisition expenses and that Buyer will allocate such expenses appropriately. (b) Seller and Buyer agree to prepare and file on a timely basis any relevant Tax Returns required to be filed pursuant to Section 1060 of the Code, the Treasury regulations thereunder or any provisions of local, state and foreign law (including, without limitation, Asset Acquisition Statements on IRS Form 8594), setting forth an allocation of the Purchase Price, pursuant to Section 1060 of the Code and the Treasury regulations thereunder, in a manner entirely consistent with the allocation set forth in SCHEDULE 2.2 and agree to act in accordance with such allocation in the preparation of financial statements and the filing of all Tax Returns and in the course of any Tax audit, Tax review or Tax litigation relating thereto. None of Buyer, Parent and Seller will assert that the allocation reflected in the Notice of Allocation was not separately bargained for at arm's-length and in good faith. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER Except as set forth in the Disclosure Schedule delivered by Seller to Buyer attached to and incorporated in this Agreement (the "SELLER DISCLOSURE SCHEDULE"), which Seller Disclosure Schedule shall reference disclosure items by section, Seller and Parent jointly and severally represent and warrant to Buyer as follows: 3.1 ORGANIZATION; APPROVALS. Parent is a corporation validly existing and in good standing under the laws of the State of Delaware. Seller is a corporation validly existing and in good standing under the laws of the State of Delaware. Seller has the requisite corporate power and authority and is in possession of all franchises, grants, authorizations, licenses, permits, easements, consents, certificates, approvals and orders ("SELLER APPROVALS") necessary to own, lease and operate its properties and to carry on its business as it is now being conducted, and Seller has not received any notice of proceedings relating to the revocation or modification of any Seller Approvals, except where the failure to be so organized, existing and in good standing or to have such power, authority, Seller Approvals and revocations or modifications would not, individually or in the aggregate, have a Material Adverse Effect (as defined in SECTION 10.3) with respect to the Business. 3.2 CERTIFICATE OF INCORPORATION AND BYLAWS. Seller previously has furnished to Buyer a true, complete and accurate copy of its current Certificate of Incorporation and Bylaws, as amended or restated (the "SELLER CERTIFICATE" or "SELLER BYLAWS"). Such Seller Certificate and Seller Bylaws are in full force and effect. Seller is not in violation of any of the provisions of the Seller Certificate or Seller Bylaws. 3.3 AUTHORITY. Each of Parent and Seller has the requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Seller and Parent and the consummation by each of Seller and Parent of the transaction contemplated hereby have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of Seller or Parent are necessary to authorize this Agreement or to consummate the transactions contemplated hereby (other than applicable stockholder approvals). This Agreement has been duly executed and delivered by, and constitutes a valid and binding obligation of, Seller and Parent and, assuming due authorization, execution and delivery by Buyer, is enforceable against Seller and Parent in accordance with its terms, except as enforcement may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally. 3.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and delivery of this Agreement by Seller and Parent does not, and the performance of this Agreement and the transactions contemplated hereby by Seller and Parent shall not, (i) conflict with or violate the Seller Certificate or Seller Bylaws or the Certificate of Incorporation or Bylaws of Parent, (ii) conflict with or violate any federal or state law, statute, ordinance, rule, regulation, order, judgment or decree (collectively, "LAWS") applicable to Seller or Parent or by which it or any of their properties are bound or affected, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of 68 termination, amendment, acceleration or cancellation of, or result in the creation of a Lien (as defined in SECTION 10.3) on any of the Purchased Assets pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Seller or Parent are parties or by which they or any of their properties are bound or affected, except in the case of clauses (ii) and (iii) for any such conflicts, violations, breaches, defaults or other occurrences that, individually or in the aggregate, would not have a Material Adverse Effect with respect to the Business. Seller is not a "restricted subsidiary" under the terms of that certain Indenture dated as of October 23, 1996, by and among Parent, CPC and the other parties thereto. (b) The execution and delivery of this Agreement by Seller and Parent does not, and the performance of this Agreement by Seller or Parent shall not, require any consent, approval, authorization or permit of, or filing with or notification to any governmental or regulatory authority or any third party except for applicable requirements, if any, of the Securities Act of 1933, as amended (the "SECURITIES ACT"), the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), state securities or blue sky laws ("BLUE SKY LAWS"), the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), the filing of other documents as required by applicable Law, applicable transfer tax filings and where the failure to obtain such consents, approvals, authorizations or permits would not prevent or delay consummation of the transactions contemplated hereby, or otherwise prevent Seller or Parent from performing its obligations under this Agreement and would not have a Material Adverse Effect with respect to the Business. 3.5 COMPLIANCE; PERMITS. Seller is not in conflict with, or in default or violation of, (i) any Law applicable to Seller or by which the Business is bound or affected, or (ii) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Seller is a party or by which the Business is bound or affected, except for any such conflicts, defaults or violations which would not, individually or in the aggregate, have a Material Adverse Effect with respect to the Business. 3.6 INVENTORY. The inventory of Seller consists of raw materials and supplies, manufactured and processed parts, work-in-progress and finished goods, all of which is merchantable and fit for the purpose for which it was procured or manufactured, and none of which is slow moving, obsolete, damaged or defective, subject to the reserve for inventory writedown set forth on Seller's balance sheet at December 31, 1998 (or in any notes thereto), and as adjusted for operations and transactions through the Closing Date in accordance with the past custom and practice of Seller. 3.7 ACCOUNTS RECEIVABLE. The accounts receivable of Seller are reflected properly on its books and records, are valid receivables subject to no setoffs or counterclaims, are current and collectible, and will be collected in accordance with their terms at their recorded amounts, subject to the reserve for bad debts set forth on Seller's balance sheet at December 31, 1998 (or in any notes thereto), and as adjusted for operations and transactions through the Closing Date in accordance with the past custom and practice of Seller. All accounts receivable of Seller are listed in SECTION 3.7 of the Seller Disclosure Schedule. 3.8 FINANCIAL STATEMENTS. (a) Prior to the execution of this Agreement, Seller has delivered to Buyer complete and correct copies of Seller's unaudited balance sheet and income statement for the period ended December 31, 1998, and Parent's audited consolidated balance sheet and income statement for the year ended December 31, 1998 (the "FINANCIAL STATEMENTS"). All such Financial Statements are complete and correct in all material respects and were (i) prepared from the books of account or other financial records of Seller and Parent, (ii) prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements), and (iii) fairly present in all material respects the consolidated financial position of Seller and Parent at the respective dates and the consolidated results of operations and cash flows for the periods indicated, except that the interim consolidated financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount or effect and do not have any footnote disclosures. 69 (b) Except (i) for the liabilities that are fully reflected or reserved against in the Financial Statements (including any related notes thereto) or not required to be reflected or reserved against in accordance with GAAP and (ii) for the liabilities incurred in the ordinary course of business consistent with past practice since December 31, 1998, neither Parent nor Seller has incurred any liability that, either alone or when combined with all similar liabilities, has had or would have a Material Adverse Effect with respect to the Business. 3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the Financial Statements or reports filed by Parent pursuant to the Securities Act or Exchange Act (the "PARENT REPORTS") filed prior to the date of this Agreement, since December 31, 1998 to the date of this Agreement, Seller has conducted the Business only in the ordinary course and in a manner consistent with past practice and, since December 31, 1998, there has not been (i) any change in the financial condition, results of operations or business of Seller having a Material Adverse Effect with respect to the Business, (ii) any damage, destruction or loss not covered by insurance with respect to any assets of Seller having a Material Adverse Effect with respect to the Business, (iii) any declaration, setting aside or payment of any dividends or distributions in respect of shares of capital stock of Seller or any redemption, purchase or other acquisition of any of its securities, (iv) any entering into of any new, or modification, amendment or termination (partial or complete) of any existing collective bargaining agreement, contract or other agreement or understanding with a labor union or similar organization to which Seller has been, or is, a party or Plan (as defined below), or other increase in the salary, bonus, rate of commission or rate of consulting fees payable or to become payable to any directors, officers, employees or consultants of Seller, or employment or severance agreement or other employee compensation arrangement with any of its directors, officers or employees (whether new hires or existing employees), in each case where such compensation or arrangement exceeds $75,000, or (v) any union organizing activities relating to employees of Seller or any entering into of any other material transaction involving or affecting each Seller outside the ordinary course of business of Seller consistent with past practice. 3.10 ABSENCE OF LITIGATION. Neither Seller nor Parent is a party to any, and there are no pending or, to the knowledge of Seller and Parent, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Seller or Parent challenging the validity or propriety of the transactions contemplated by this Agreement which if unfavorably determined would prevent the consummation of the transactions contemplated hereby. There are no claims and judgments pending with respect to which Seller has been duly served or otherwise received notice as of the date of this Agreement, or, to the knowledge of either Seller or Parent, threatened against Seller or outstanding against Seller or affecting the Business, that in the aggregate would have a Material Adverse Effect on the Business. No injunction, order, judgment, decree or regulatory restriction has been imposed on Parent, Seller or the assets of Seller which has had or reasonably could be expected to have a Material Adverse Effect with respect to the Business. 3.11 EMPLOYEE BENEFIT PLANS. (a) PLANS OF SELLER. SECTION 3.11(a) of the Seller Disclosure Schedule lists (i) all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and all bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements and all employment termination, severance or other employment contracts or employment agreements, with respect to which Seller has any obligation and which benefit any of its employees (collectively, the "PLANS"). Seller has furnished or made available to Buyer a copy of each Plan (or a description of the Plans, if the Plans are not in writing) and a copy of (i) each trust or other funding arrangement, (ii) each summary plan description and summary of material modifications, (iii) any IRS Forms 5500 and related schedules filed since August 1998, (iv) any IRS determination letter for each such Plan issued since August 1998, (v) any actuarial and financial statements in connection with each such Plan issued since August 1998, and (vi) any other material information relating to each such Plan as requested by Buyer, to the extent it is available to the Company. (b) ABSENCE OF CERTAIN TYPES OF PLANS. No plan is described in Section 401(a)(1) of ERISA. SECTION 3.11(b) of the Seller Disclosure Schedule lists all Plans that obligate Seller to pay separation, severance, termination or similar-type benefits solely as a result of any transactions contemplated by this 70 Agreement or as a result of a "change in control," within the meaning of such term under Section 280G of the Code (as defined below). (c) COMPLIANCE WITH APPLICABLE LAW. Except as set forth in SECTION 3.11(c) of the Seller Disclosure Schedule, each Plan has been operated in all material respects in accordance with the requirements of all applicable Law and all persons who participate in the operation of such Plans and all Plan "fiduciaries" (within the meaning of Section 3(21) of ERISA) have acted in all material respects in accordance with the provisions of all applicable Law. Seller has performed in all material respects all obligations required to be performed by it under the Plans, is not in material default under or in material violation of the Plans and Seller has no knowledge of any such default or violation by any party to the Plans. (d) QUALIFICATION OF CERTAIN PLANS. Each Plan that is intended to be qualified under Section 401(a) of the Code or Section 401(k) of the Code (including each trust established in connection with such a Plan that is intended to be exempt from Federal income taxation under Section 501(a) of the Code) has received a favorable determination letter from the Internal Revenue Service ("IRS") that it is so qualified, and to Seller's knowledge no material fact or event has occurred since the date of such determination letter from the IRS to adversely affect the qualified status of any such Plan. No trust, if any, maintained or contributed by Seller to fund any Plan is intended to be qualified as a voluntary employees' beneficiary association or is intended to be exempt from federal income taxation under Section 501(c)(9) of the Code. (e) ABSENCE OF CERTAIN LIABILITIES AND EVENTS. Seller has not incurred any material liability under Title IV of ERISA or for any excise tax arising under Section 4971 through 4980E of the Internal Revenue Code of 1986, as amended (the "CODE") with respect to any Plan, and to the knowledge of Seller no fact or event exists that could give rise to any such liability. (f) PLAN CONTRIBUTIONS. All contributions, premiums or payments required to be made with respect to any Plan have been made. (g) MULTIEMPLOYER PLANS. Each Plan that is a multiemployer plan (within the meaning of Section 3(37) of ERISA) is disclosed in SECTION 3.11(g) of the Seller Disclosure Schedule. With respect to each such plan, (i) no withdrawal liability has been incurred by Seller and Seller has no reason to believe that any such liability will be incurred prior to the Closing Date, (ii) to Seller's knowledge no such plan is in "reorganization" (within the meaning of Section 4241 of ERISA), no proceedings have been instituted by the Pension Benefit Guaranty Corporation against the plan, there is no contingent liability for withdrawal liability by reason of a sale of assets pursuant to Section 4204 of ERISA, and any withdrawal under Section 4203 of ERISA that will occur by reason of the Closing will not result in the imposition of withdrawal liability on Seller, and (iii) no notice has been received that increased contributions may be required to avoid a reduction in plan benefits or the imposition of an excise tax, or that the plan is or may become "insolvent" (within the meaning of Section 4245 of ERISA). (h) POST-RETIREMENT MEDICAL. No Plan provides medical or life benefits beyond an employee's termination of employment (other than as required by applicable Law). 3.12 LABOR AND EMPLOYMENT MATTERS. (a) Except for confidentiality, noncompetition, consulting or other similar contracts with any employees, consultants, officers or directors of Seller set forth in SECTION 3.12(a) of the Seller Disclosure Schedule, Seller is not a party to any such contracts. Each such contract is in full force and effect and neither Seller nor Parent or, to the knowledge of Seller or Parent, any other party to such contract has received notice that Seller is in violation or breach of or default in any material respect under any such contract (or with notice or lapse of time or both, would be in violation or breach of or default in any material respect under any such contract). 71 (b) Except as set forth in SCHEDULE 3.12(b) of the Seller Disclosure Schedule: (i) Seller's current employees are not represented by a labor union or organization, no labor union or organization has been certified or recognized as a representative of any such current employees, and Seller is not a party to and/or has any obligation under any collective bargaining agreement or other labor union contract, white paper or side agreement with any labor union or organization or any obligation to recognize or deal with any labor union or organization, and there are no such contracts, white papers or side agreements pertaining to or which determine the terms or conditions of employment of any current employees of Seller; (ii) there are no pending or threatened representation campaigns, elections or proceedings or questions concerning union representation involving any current employees; (iii) neither Seller nor Parent has knowledge of any activities or efforts of any labor union or organization (or representatives thereof) to organize any current employees of Seller, nor of any demands for recognition or collective bargaining, nor of any strikes, slowdowns, work stoppages or lock-outs of any kind, or threats thereof, by or with respect to any current employees or any actual or claimed representatives thereof, and no such activities, efforts, demands, strikes, slowdowns, work stoppages or lock-outs occurred since July 15, 1998 (and, to the knowledge of Seller and Parent, for the past 24 months); (iv) Seller has not engaged in, admitted committing or been held in any administrative or judicial proceeding to have committed any unfair labor practice under the National Labor Relations Act, as amended; (v) Seller is not involved in any industrial or trade dispute or any dispute or negotiations regarding a claim of material importance with any labor union or organization; and (vi) there are no controversies, claims, demands or grievances of material importance pending or, so far as Seller or Parent is aware, threatened, between Seller, on the one hand, and any of its employees or any actual or claimed representative thereof, on the other hand. (c) Seller is in material compliance with all Laws relating to the employment of labor, including but not limited to such Laws relating to wages, hours, the Worker Adjustment Retraining and Notification Act of 1988 ("WARN"), collective bargaining, discrimination, civil rights, safety and health, worker's compensation and the collection and payment of withholding and/or social security taxes and any similar tax. 3.13 TANGIBLE PERSONAL PROPERTY. Seller has good and indefeasible title to all of its owned tangible personal property and assets, free and clear of all Liens, except liens for Taxes not yet due and payable, pledges to secure deposits and such minor imperfections of title, if any, as do not materially detract from the value of or interfere with the present use of such property or which, individually or in the aggregate, would not have a Material Adverse Effect with respect to the Business. All leases pursuant to which Seller leases from others tangible or personal property are in good standing, valid and effective in accordance with their respective terms. All items of tangible personal property are listed in SECTION 3.13 of the Seller Disclosure Schedule, indicating which such tangible personal property is owned or leased. All such tangible personal property is adequate and suitable for the conduct of the Business and is in good working order and condition, ordinary wear and tear excepted. 3.14 ENVIRONMENTAL MATTERS. Seller and Parent represent and warrant as follows: (i) Seller and all Real Property and real property subject to Real Property Leases are in compliance with all applicable Environmental Laws (as defined below); (ii) there is no amount of asbestos or ureaformaldehyde material in or on any property owned, leased or operated by Seller or Parent in connection with the Business; (iii) there are no underground storage tanks located on, in or under any properties currently owned, leased or operated by Seller or Parent in connection with the Business that violate or result in liability under any Environmental Law (as defined below); (iv) neither Seller nor Parent have been notified by any governmental agency or third party of any pending or threatened Environmental Claim (as defined below) against Seller or Parent in connection with the Business; (v) neither Seller nor Parent have been notified by any governmental agency or any third party that either Seller or Parent in connection with the Business may be a potentially responsible party for environmental contamination or any Release (as defined below) of Hazardous Materials (as defined below) in connection with the Business; (vi) Seller has obtained and holds all permits, licenses and authorizations required under applicable Environmental Laws relating to the Business ("ENVIRONMENTAL PERMITS"); (vii) Seller is in compliance with all terms, conditions and provisions of all applicable Environmental Permits; (viii) no Releases of Hazardous Materials have occurred at, from, in, on, or under any property currently or formerly owned, 72 operated or leased by Seller or Parent in connection with the Business or any predecessors of the Seller or Parent in connection with the Business and no Hazardous Materials are present in, on or about any such property that could give rise to an Environmental Claim by a third party (including any governmental entity or private party) against Seller; and (ix) neither Seller nor Parent in connection with the Business have transported or arranged for the treatment, storage, handling, disposal or transportation of any Hazardous Material to any location which could result in an Environmental Claim against or liability to Seller; and (x) there have been no environmental investigations, studies, audits or tests conducted by, on behalf of or which are in the possession of any Seller or the Parent with respect to any property currently or formerly owned, leased or operated by either Seller or Parent in connection with the Businesses thereof which have not been delivered to Buyer prior to execution of this Agreement, except in each case where such event or condition would not have a Material Adverse Effect on the Business. For purposes of this Section, "ENVIRONMENTAL CLAIMS" shall mean any and all administrative, regulatory, judicial or private actions, suits, demands, notices, claims, investigations, injunctions or similar proceedings that may create liability for Seller in any way relating to: (i) any Environmental Law; (ii) any Hazardous Material, including without limitation any investigation, monitoring, abatements, removal, remedial, corrective or other response action in connection with any Hazardous Material, Environmental Law or order or notice of liability or violation of a governmental entity or Environmental Law; or (iii) any actual or alleged damage, injury, threat or harm to the environment. "HAZARDOUS MATERIALS" shall mean any and all chemicals, pollutants, contaminants, wastes, toxic substances, compounds, products, solid, liquid, gas, petroleum, asbestos, asbestos-containing materials, polychlorinated biphenyls or other regulated substances or materials which are hazardous, toxic or otherwise harmful to the environment. "ENVIRONMENTAL LAW" shall mean any and all federal and state civil and criminal laws, statutes, ordinances, orders, codes, rules or regulations of any governmental or regulatory authority relating to the protection of health, the environment, natural resources, worker health and safety and/or governing the handling, use, generation, treatment, storage, transportation, disposal, manufacture, distribution, formulation, packaging, labeling, or Release of Hazardous Materials, including but not limited to: the Clean Air Act, 42 U.S.C. Section7401 ET SEQ.; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section9601 ET SEQ.; the Federal Water Pollution Control Act, 33 U.S.C. Section1251 ET SEQ.; the Hazardous Material Transportation Act, 49 U.S.C. Section1801 ET SEQ.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section136 ET SEQ.; the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section6901 ET SEQ.; the Toxic Substances Control Act, 15 U.S.C. Section2601 ET SEQ.; the Occupational Safety & Health Act of 1970, 29 U.S.C. Section651 ET SEQ.; the Oil Pollution Act of 1990, 33 U.S.C. Section2701 ET SEQ.; and the state analogies thereto, all as amended or superseded from time to time, on or before, but not after, the Closing Date. "RELEASE" shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing of a Hazardous Material into the environment. 3.15 ABSENCE OF AGREEMENTS. Seller is not a party to any agreement, order, directive, memorandum of understanding or similar arrangement that restricts materially the conduct of the Business, except for those the existence of which has been disclosed in writing to Buyer prior to the date of this Agreement, nor has Seller been advised, that any person or governmental authority is contemplating issuing or requesting any such agreement, order, directive, memorandum of understanding or similar arrangement. 3.16 TAXES. (a) The Seller and Parent jointly and severally represent and warrant as follows, limited, however, in each case, to Taxes, Tax Returns or other Tax matters (i) that include, relate to or otherwise affect the Business or the Purchased Assets, (ii) that could result in the imposition of a lien on, or the assertion of a claim against, the Buyer with respect to any Purchased Asset or (iii) that could affect the computation of the taxable income or the Tax liability of Buyer or any affiliate thereof for any Post-Closing Period. Parent and Seller have duly and timely filed all federal, state, local and other returns and reports (the "TAX RETURNS") with respect to Seller or any affiliated, combined, consolidated, unitary or similar group of which Seller or any subsidiary is or was a member (a "RELEVANT GROUP") 73 which are required to be filed with respect to all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, transfer, value added, franchise, withholding, payroll, employment, disability, excise, property, alternative or add-on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatever, except to the extent in dispute and set forth in SECTION 3.16(a) of the Seller Disclosure Schedule, together with any interest, penalties, additions to tax or additional amounts with respect thereto (the "TAXES"); all Taxes shown on the Tax Returns have been fully and timely paid and all such Tax Returns are complete and correct. There are no pending or, to the knowledge of Parent and Seller, threatened examinations, claims, liens, assessments or deficiencies to which Seller or the Purchased Assets may be subject; all Taxes due and payable by Parent or Seller with respect to the Purchased Assets have been fully and timely paid. (b) Seller is not a party to any agreement extending the time within which to file any Tax Return. To Seller's knowledge, no claim has been made by a jurisdiction in which Seller does not file Tax Returns that Seller is or may be subject to taxation by that jurisdiction. (c) Seller has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to any Tax assessment or deficiency. 3.17 INSURANCE. SECTION 3.17 of the Seller Disclosure Schedule lists all policies of insurance of Seller currently in effect. Each policy listed on such Schedule is valid and in full force and effect. To Parent's and Seller's knowledge, Seller has no liability for unpaid premiums or premium adjustments not properly reflected on the applicable financial statements. 3.18 BROKERS. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or Seller, except as provided in that certain letter agreement between Parent and Schroder & Co. Inc. regarding such fees and such fees are the sole responsibility of, and are to be paid by, Parent. 3.19 MATERIAL CONTRACTS. Except as included as exhibits in Parent Reports, Seller is not a party to or obligated under any material contract, agreement or other instrument or understanding that is not terminable by Seller without additional payment or penalty within 90 days. 3.20 SUBSTANTIAL CUSTOMERS AND SUPPLIERS. SECTION 3.20 of the Seller Disclosure Schedule lists the 5 largest customers or clients of Seller on the basis of revenues for goods sold or services provided in the fiscal year ended 1997 and the 10 largest customers or clients in the fiscal year ended 1998. SECTION 3.20 of the Seller Disclosure Schedule lists the 10 largest suppliers of Seller on the basis of cost of goods or services purchased in the fiscal years ended 1997 and 1998. For each such customer or supplier set forth in such Schedule, a copy of such supplier or customer contract, agreement or understanding with Seller or Parent has been delivered to Buyer prior to execution of this Agreement. No such customer, client or supplier has ceased or materially reduced its purchases from or sales or provision of services to Seller since December 31, 1998, or to the knowledge of Seller or Parent, has threatened to cease or materially reduce such purchases or sales or provision of services after the date of this Agreement. Except for deposits or other nonmaterial amounts paid in the ordinary course of business consistent with past practice, Seller has not accepted any prepayment of any sales price or fee from any client or customer that relates to products not yet delivered or services not yet performed by Seller. 3.21 INTELLECTUAL PROPERTY. (a) Seller owns all right, title and interest in or possesses adequate licenses or other rights to use (i) all discoveries and inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications (either filed or in preparation for filing), and patent disclosures, together with all reissuance, continuations, continuations-in-part, revisions, extensions and reexaminations thereof, (ii) all trademarks, service marks, trade dress, brand names, logos, trade names, Internet domain names, and corporate names, together with all translations, adaptations, derivations and combinations thereof and including all goodwill associated therewith, and all applications (either filed or in preparation for filing), registrations and renewals in 74 connection therewith, (iii) all copyrightable works, all copyrights and all applications (either filed or in preparation for filing), registrations and renewals in connection therewith, (iv) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, recipes, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals), (v) all computer software (including source code, data and related documentation), (vi) all other proprietary rights, (vii) all copies and tangible embodiments of all the foregoing (in whatever form or medium) ("INTELLECTUAL PROPERTY") used in or material to conduct the Business without conflict with the rights of others. Seller Disclosure Schedule SECTION 3.21(a) sets forth a description of (i) all Intellectual Property currently owned by or licensed to Seller and (ii) all licenses, royalties, assignments and other similar agreements relating to the foregoing to which Seller is a party and all agreements relating to technology, know-how or processes that Seller is licensed or authorized to use by others, or which it licenses or authorizes others to use, and which Seller uses (the "INTELLECTUAL PROPERTY AGREEMENTS"). No other Intellectual Property is used in or material to the conduct of the Business. (b) The Intellectual Property does not infringe or violate the intellectual property or contractual rights of any third parties in any country where Seller does Business; to Seller's knowledge, no claim has been asserted or threatened by any person to the ownership of or right to use any Intellectual Property or challenging or questioning the validity or effectiveness of any such license or agreement, and neither Parent nor Seller has knowledge of a valid basis for any such claim; Parent and Seller have no knowledge of any claim that any product, activity or operation of Seller infringes upon or involves, or has resulted in the infringement of, any intellectual property rights of any other person, and no proceedings have been instituted, are pending or, to the best of the knowledge of Parent and Seller, are threatened which challenge the rights of Seller with respect thereto, and neither Parent nor Seller has knowledge of a valid basis for any such claim. (c) To Seller's knowledge, no Intellectual Property is being infringed by any third party; no action has been asserted or threatened that any Intellectual Property is being infringed by any third party. (d) All of the registrations and applications set forth in SECTION 3.21(d) of the Seller Disclosure Schedule are in full force and effect and all necessary registration, maintenance and renewal fees in connection therewith have been made and all necessary documents and certificates in connection therewith have been filed with the relevant patent, copyright, trademark or other authority in the United States or foreign jurisdictions, as the case may be, for the purpose of maintaining the registrations or applications for registration of such Intellectual Property or updating record title thereto, except where such events, either individually or in the aggregate, would not, or be reasonably likely to, have a Material Adverse Effect on the Business. (e) All of the Intellectual Property is free and clear of any and all Liens. There are no restrictions on the direct or indirect transfer of the Intellectual Property, except as disclosed in any agreements licensing such Intellectual Property to Seller. (f) The Intellectual Property Agreements are valid and binding and in full force and effect, and true and correct copies have been provided to the Buyer; Seller has not granted any license, agreement or other permission to use such Intellectual Property except as disclosed on SECTION 3.21(f) of the Seller Disclosure Schedule; the consummation of the transactions contemplated by this Agreement will not violate nor result in the breach, modification, cancellation, termination or suspension of the Intellectual Property Agreements, and Seller is in compliance with, and has not breached any term of, any Intellectual Property Agreement, and, to the knowledge of Seller, all of the other parties to such Intellectual Property Agreements are in compliance with, and have not breached, any of the terms thereof; there is no dispute between Seller and any other party to any Intellectual Property Agreement regarding the scope of the license or performance under any applicable Intellectual Property Agreement, including with respect to any payments to be made by the Seller thereunder, except where such events, either individually or in the aggregate, would not have, or be reasonably likely to have, a Material Adverse Effect on the Business. 75 (g) Seller has made available to Buyer prior to the execution of this Agreement any available documentation with respect to any invention, process, design, computer software and program or other know-how or trade secret or proprietary information included in such Intellectual Property, which documentation, if any, is accurate in all material respects and reasonably sufficient in detail and content to identify and explain such invention, process, design, computer software and programs or other know-how or trade secret or proprietary information. Seller has taken reasonable security measures to protect the secrecy, confidentiality and value of their trade secrets and proprietary information (including the reasonable enforcement by Seller of a policy requiring each employee or contractor to execute proprietary information and confidentiality agreements in substantially Seller's standard form, and to Seller's knowledge all current and former employees and contractors of Seller have executed such an agreement). 3.23 YEAR 2000 REPRESENTATION. No technology owned, developed or licensed by the Company or used in connection with the business (including, but not limited to, information systems and technology, commercial and noncommercial hardware and software, firmware, mechanical or electrical products, embedded systems, or any other electro-mechanical or processor-based system, whether as part of a desktop system, office system, building system or otherwise) (collectively, the "TECHNOLOGY") will experience any malfunctions, premature cancellation or expiration of contractual rights or deletion of data, or any other problems in connection with (i) the year 2000 (and all subsequent years) as distinguished from 1900 years, (ii) the date February 29, 2000, and all subsequent leap years, and (iii) the date September 9, 1999, except where such problems, either individually or in the aggregate, would not have a Material Adverse Effect on the Business. 3.24 REAL PROPERTY. The Real Property listed on SECTION 1.1(a) of the Seller Disclosure Schedule and Real Property Leases listed on SECTION 1.1(b) of the Seller Disclosure Schedule are the only property of similar type used by Seller in the Business. Seller owns the Real Property in fee subject to no Liens, except for those set forth in SECTION 3.24 of the Seller Disclosure Schedule. Seller's interest in the Real Property Leases is subject to no Liens, except for those set forth in SECTION 3.24 of the Seller Disclosure Schedule. True and correct copies of the Real Property Leases have been delivered or made available to Buyer by Seller. Subject to the terms of the respective Real Property Leases, Seller has a valid and subsisting leasehold estate in and the right to quiet enjoyment to the property subject thereto for the full term of the respective Real Property Lease. The Real Property Leases are in full force and effect and are enforceable in accordance with their respective terms, except as such enforceability may be subject to or limited by bankruptcy, insolvency, reorganization or other similar Laws, now or hereafter in effect, affecting the enforcement of creditors' rights generally. Seller has not assigned, pledged, mortgaged, hypothecated or otherwise transferred any Real Property Lease. Seller has not sublet all or any portion of any Leased Real Property. Seller has not received any written notice of default under any Real Property Lease, and to Seller's knowledge there is no material default by any tenant or landlord under any Real Property Lease, and no event has occurred or failed to occur which, with the giving of notice or the passage of time, or both, would constitute a material default under any Real Property Lease. No portion of any parcel of Real Property or real property subject to a Real Property Lease is located in an area designated as a flood zone by any governmental entity, except to the extent such property is adequately insured by a policy of flood insurance. The Facilities are adequate and suitable for the conduct of the Business and are in good working order and condition, ordinary wear and tear excepted. 3.25 DISCLOSURE. No representation or warranty of Seller or Parent contained in this Agreement, and no statement contained in the Seller Disclosure Schedule or in any certificate, list or other writing furnished to Buyer pursuant to any provision of this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. 3.26 MATERIAL ADVERSE EFFECT. Since December 31, 1998, there has been no Material Adverse Effect with respect to the Business. 76 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER Except as set forth in the Disclosure Schedule delivered by Buyer to Seller and Parent attached to this Agreement (the "BUYER DISCLOSURE SCHEDULE"), which Buyer Disclosure Schedule shall reference disclosure items by section, Buyer represents and warrants to Seller and Parent as follows: 4.1 ORGANIZATION; APPROVALS. Buyer is a corporation validly existing and in good standing under the Canada Business Corporations Act. Buyer has the requisite corporate power and authority and is in possession of all franchises, grants, authorizations, licenses, permits, easements, consents, certificates, approvals and orders ("BUYER APPROVALS") necessary to own, lease and operate its properties and to carry on its business as it is now being conducted, and Buyer has not received any notice of proceedings relating to the revocation or modification of any Buyer Approvals, except where the failure to be so organized, existing and in good standing or to have such power, authority, Buyer Approvals and revocations or modifications would not, individually or in the aggregate, have a Material Adverse Effect with respect to Buyer. 4.2 AUTHORITY. Buyer has the requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Buyer and the consummation by Buyer of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of Buyer are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by, and constitutes a valid and binding obligation of, Buyer and, assuming due authorization, execution and delivery by Seller and Parent, is enforceable against Buyer in accordance with its terms, except as enforcement may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally. 4.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and delivery of this Agreement by Buyer does not, and the performance of this Agreement and the transactions contemplated hereby by Buyer shall not, (i) conflict with or violate the charter documents of Buyer, (ii) conflict with or violate any Laws applicable to Buyer or by which it or any of its properties are bound or affected, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any of the properties or assets of Buyer pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Buyer is a party or by which it or any of its properties is bound or affected, except in the case of clauses (ii) and (iii) for any such conflicts, violations, breaches, defaults or other occurrences that, individually or in the aggregate, would not have or be reasonably likely to have a Material Adverse Effect with respect to Buyer. (b) The execution and delivery of this Agreement by Buyer does not, and the performance of this Agreement by Buyer shall not, require any consent, approval, authorization or permit of, or filing with or notification to any governmental or regulatory authority or any third party except for applicable requirements, if any, of the Securities Act, the Exchange Act, the Blue Sky Laws, the HSR Act, and filing of other documents as required by applicable law, applicable transfer tax filings and where the failure to obtain such consents, approvals, authorizations or permits would not prevent or delay consummation of the transactions contemplated hereby or otherwise prevent Buyer from performing its obligations under this Agreement and would not have a Material Adverse Effect with respect to Buyer. 4.4 ABSENCE OF LITIGATION. Buyer is not a party to any, and there are no pending or, to the knowledge of Buyer, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Buyer challenging the validity or propriety of the transactions contemplated by this Agreement which if unfavorably determined would prevent the consummation of the transactions contemplated hereby. 77 4.5 BROKERS. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Buyer, except as provided in that certain letter agreement between Buyer and Downer & Company L.L.C. regarding such fees, which fees are the sole responsibility of, and are to be paid by, Buyer. 4.6 DISCLOSURE. No representation or warranty of Buyer contained in this Agreement, and no statement contained in the Buyer Disclosure Schedule or in any certificate, list or other writing furnished to Seller or Parent pursuant to any provision of this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. ARTICLE V CERTAIN COVENANTS 5.1 AFFIRMATIVE COVENANTS. Seller and Parent covenant and agree with Buyer that from and after the date of this Agreement and prior to the Closing Date, unless the prior written consent of Buyer shall have been obtained and except as otherwise contemplated herein, Seller will, and Parent shall cause Seller to: (a) operate its business only in the ordinary course consistent with past practices; (b) use reasonable efforts to preserve intact its business organization and assets, maintain its rights and franchises, retain the services of its officers and key employees and maintain its relationships with customers; (c) use reasonable efforts to maintain and keep its properties in good repair and condition, ordinary wear and tear excepted; (d) use reasonable efforts to keep in full force and effect insurance and bonds comparable in amount and scope of coverage to that now maintained by it; (e) perform in all material respects all obligations required to be performed by it under all material contracts, leases and documents relating to or affecting the Business; (f) maintain its Books and Records in the usual, regular or ordinary manner consistent with past practice and provide Buyer access to such materials at a reasonable time and place as Buyer and Seller may agree; (g) use reasonable efforts to obtain all authorizations, consents, orders and approvals from all governmental or regulatory authorities that may be or become necessary for its execution and delivery of and the performance of its obligations under this Agreement; (h) take such reasonable action as shall be required to fulfill any and all contractual or statutory obligations Seller may have to any unions or labor organizations or otherwise as a result of or relating to the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby; (i) take such reasonable actions required pursuant to the terms of any contracts and agreements to address the consequences of the transactions contemplated by this Agreement, and to obtain necessary consents and required releases; and (j) use best efforts to obtain from the City of Carbondale (the "City") an amendment to the Lease Agreement listed on SCHEDULE 1.1(b), whereby the City waives its termination rights pursuant to the provisions of Article XIV of such Lease Agreement. In addition, Parent will vote all of its shares of stock of Seller to authorize the transactions contemplated by this Agreement pursuant to the terms and conditions set forth in this Agreement. 78 5.2 NEGATIVE COVENANTS. Except as specifically contemplated by this Agreement, from the date of this Agreement until the Closing Date, Seller shall not, and Parent shall cause Seller not to, without the prior written consent of Buyer, do any of the following: (a) except as required by applicable Law or to maintain qualification pursuant to the Code, adopt, amend, renew or terminate any Plan or any agreement, arrangement, plan or policy between Seller and one or more of Seller's current or former directors, officers or employees, or except for normal increases in the ordinary course of business consistent with past practice or except as required by applicable Law, increase in any manner the base salary, bonus incentive compensation or fringe benefits of any director, officer or employee or pay any benefit not required by any Plan or agreement as in effect as of the date of this Agreement (including without limitation the granting of stock options, stock appreciation rights, restricted stock, restricted stock units or performance units or shares); (b) (i) merge with or into any other corporation, permit any other corporation to merge into it or consolidate with any other corporation, or effect any reorganization or recapitalization; (ii) purchase or otherwise acquire any substantial portion of the assets or stock of any corporation; or (iii) liquidate, sell, dispose of, or encumber any assets or acquire any assets, other than in the ordinary course of its business consistent with past practice; (c) propose or adopt any amendments to the Seller Certificate or Seller Bylaws in any way adverse to Buyer; (d) change any of its methods of accounting in effect at December 31, 1998 or change any of its methods of reporting income or deductions for federal income tax purposes from those employed in the preparation of the federal income tax returns for the taxable year ended December 31, 1998, except as may be required by Law or GAAP; (e) change in any material respect any material policies concerning the Business, except as required by Law, including without limitation: (i) sell, assign, transfer, pledge, mortgage or otherwise encumber any of its assets, except for those sales, assignments, transfers, pledges, mortgages and encumbrances (A) currently existing or provided for in existing agreements, (B) incurred in individual amounts of less than $75,000 and in an aggregate amount of no more than $750,000 or (C) incurred in the ordinary course of business consistent with past practice; (ii) enter into any agreement with respect to any acquisition of a material amount of assets or any discharge, waiver, satisfaction, release or relinquishment of any material contract rights, liens, encumbrances, debt or claims, not in the ordinary course of business and consistent with past practices; (iii) settle any claim, action, suit, litigation, proceeding, arbitration, investigation or controversy of any kind, for any amount in excess of $75,000, net of any insurance proceeds, that would restrict in any material respect the Business; (iv) make any capital expenditure in excess of $500,000, except in the ordinary course and consistent with past practice; (v) make any investment of more than $100,000; or (vi) take any action or fail to take any action which individually or in the aggregate would have a Material Adverse Effect with respect to Seller or the Business; PROVIDED, HOWEVER, nothing in this Section shall prevent Seller from eliminating intercompany assets and liabilities prior to the Closing; and (f) agree in writing or otherwise to do any of the foregoing. 5.3 EXCLUSIVITY For the period commencing on the date hereof and ending on the earlier of the termination of this Agreement, the date specified in SECTION 8.1(e) or the Closing (the "EXCLUSIVITY PERIOD"), except for discussions with Buyer and its representatives, Parent will not, directly or indirectly through any director, officer, shareholder, employee, agent, adviser or otherwise, orally or in writing, initiate, solicit, encourage, respond to, discuss, negotiate or accept any inquiries, indications of interest, proposals or offers from, or make any inquiries, indications of interest, proposals, offers, counter proposals or counteroffers to, or furnish any information to, any other person with respect to (i) an acquisition of shares of Seller, (ii) additional equity or convertible debt financing for Seller, (iii) an acquisition of all or a substantial part of the assets of Seller, or (iv) a merger, consolidation or any other transaction which would result in a change in control in Seller or a substantial change in the business of Seller. Further, during such Exclusivity Period Parent will promptly forward to Buyer any 79 expressions of interest or other communications or inquiries received by it in any such regard. During the Exclusivity Period, Parent will make the books, records of Parent and Seller and management of Parent available during normal business hours to Buyer and its representatives for due diligence and valuation purposes. In addition, during the Exclusivity Period, Buyer agrees that it will not, except for discussions with Parent and its representatives, directly or indirectly through any director, officer, shareholder, employee, agent, adviser or otherwise, orally or in writing, initiate, solicit, encourage, respond to, discuss, negotiate or make any inquiries, indications of interest, proposals, offers, counterproposals or counteroffers to, or furnish any information to, any other person with respect to a material transaction with or in respect of such person. 5.4 ACCESS AND INFORMATION. (a) From the date of this Agreement until the Closing Date and upon reasonable notice, and subject to applicable Law relating to the exchange of information, Parent and Seller shall afford to Buyer's officers, employees, accountants, legal counsel and other representatives, access during normal business hours to all its properties, books, contracts, commitments and records relating to the Business, but excluding any books, contracts, commitments and records in any way related to the sale of the Business. (b) From the date of this Agreement and until the Closing Date, Seller shall furnish promptly to Buyer (i) a copy of each nonconfidential filing made by Parent with the Securities and Exchange Commission (the "SEC"), under the HSR Act or under any other applicable Laws promptly after such documents are available, (ii) a copy of each Tax Return filed by Parent for the three most recent years available with respect to or containing information pertaining to the Business, a copy of any correspondence received from the IRS or any other governmental entity or taxing authority or agency and any other correspondence relating to Taxes payable with respect to the Business, and (iii) all other information concerning the Business as Buyer may reasonably request, other than in each case reports or documents which neither Seller nor Parent is permitted to disclose under applicable Law or binding agreement entered into prior to the date of this Agreement. The parties will make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply. (c) Unless otherwise required by Law, the parties will hold any such information which is nonpublic in confidence until such time as such information becomes publicly available through no wrongful act of either party, and in the event of termination of this Agreement for any reason each party shall promptly return all nonpublic documents obtained from any other party, and any copies made of such documents, to such other party or destroy such documents and copies. From the date hereof until the earlier of the Closing Date or the termination of this Agreement, and subject to the other provisions of this Agreement, the parties agree that they will take no actions outside of the ordinary course of business to harm the value of the Business conducted by Seller; provided, however, that this limitation shall not limit the ability of the parties to engage in normal competition with each other (including, to the extent applicable, effecting price adjustments to their respective products). 5.5 UPDATE DISCLOSURE; BREACHES. (a) From and after the date of this Agreement until the Closing Date, the parties shall update their respective Disclosure Schedules by written notice to the other party to reflect any matters which have occurred from and after the date of this Agreement which, if existing on the date of this Agreement, would have been required to be described therein; provided that, (i) to the extent that any information that would be required to be included in an update under this Section would have in the past been contained in internal reports prepared in the ordinary course, such update may occur by delivery of such internal reports prepared in accordance with past practice, and (ii) to the extent that updating required under this Section is unduly burdensome, Seller and Buyer will use their best efforts to develop alternate updating procedures utilizing, wherever possible, existing reporting systems. (b) Each party shall, in the event it becomes aware of the impending or threatened occurrence of any event or condition which would cause or constitute a material breach (or would have caused or constituted a material breach had such event occurred or been known prior to the date of this Agreement) of any of 80 its representations or agreements contained or referred to herein, given prompt written notice thereof to the other party and use its best efforts to prevent or promptly remedy the same. 5.6 EXPENSES. All Expenses (as defined below) incurred by Buyer, on the one hand, and Parent and/or Seller, on the other hand, shall be borne solely and entirely by Buyer, on the one hand, and Parent, on the other hand. "EXPENSES" as used in this Agreement shall include all reasonable fees and out-of-pocket expenses (including without limitation all fees and expenses of counsel, accountants, investment bankers, experts and consultants to the party and its affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation and execution of this Agreement, the solicitation of stockholder approvals and all other matters related to the closing of the transactions contemplated hereby. Parent shall be liable for and shall assume and pay the broker's fees of Schroder & Co. Inc. and Buyer shall be liable for and shall assume and pay the broker's fees of Downer & Company. 5.7 RETENTION OF RECORDS. Buyer shall retain all books and records of Seller that Buyer receives from Seller for a period of six years following the Closing Date. After the Closing, Seller and Parent and their respective representatives shall have reasonable access to all such books and records during normal business hours. In addition, Buyer shall upon reasonable request furnish to Seller or Parent, without charge, copies of any such books or records. ARTICLE VI ADDITIONAL AGREEMENTS 6.1 APPROPRIATE ACTION; CONSENTS; FILINGS. The parties shall use reasonable efforts to (i) do all things appropriate under applicable Law to consummate and make effective the transactions contemplated by this Agreement, (ii) obtain all consents, licenses, permits, waivers, approvals, authorizations or orders required under Law required in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, and (iii) make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement required under the Securities Act and the Exchange Act and the rules and regulations thereunder, any other applicable federal or state securities laws and any other applicable Law; provided that, Buyer and Seller shall cooperate with each other in connection with the making of all such filings that relate specifically to the transactions contemplated by this Agreement, including providing copies of all such documents to the nonfiling party and its advisors prior to filing and, if requested, to accept all reasonable additions, deletions or changes suggested in connection therewith. 6.2 EMPLOYEE BENEFIT MATTERS. (a) RETENTION OF LIABILITY. Except as provided in this Section, or as required pursuant to any collective bargaining agreement, neither Buyer nor any of its affiliates shall adopt, become a sponsoring employer of, nor have any obligations under or with respect to any Plan and Seller shall retain all liabilities thereunder. (b) WELFARE BENEFITS. Buyer shall be responsible for all (i) claims for medical, dental and prescription drug benefits incurred by or with respect to the Transferred Employees and former employees of the Seller (and their dependents), and (ii) claims relating to COBRA coverage attributable to "qualifying events" incurred by or with respect to any Transferred Employee or former employee of Seller (and any dependent thereof), Seller shall be responsible for any and all claims for workers compensation benefits for all Transferred Employees and former employees of the Seller with respect to all work-related injuries which occurred prior to the Closing, provided Buyer notifies Seller (directed to the attention of Craig Jennings) within three (3) business days of any report of such injury to Buyer (or one of its affiliates) by the employee. In addition, on the Closing Date and for the balance of the 1999 calendar year, Buyer (or one of its affiliates) shall cause to be maintained for the benefit of all Transferred Employees and all former employees of the Seller for whom benefits are being provided under the Spinnaker Industries Flexible Benefits Plan (the "FLEX PLAN") as of the Closing Date (together with the Transferred Employees, the "FLEX EMPLOYEES"), a plan substantially identical to the Flex Plan. As soon as practicable thereafter, the Seller shall cause to be transferred to the Buyer the credit or debit balances in the various spending accounts under the Flex Plan along with any net cash amount attributable to those balances for the Flex Employees. 81 Following such transfer, Buyer (or one of its affiliates) shall be responsible for all liabilities for all Flex Employees under the Buyer's Plan. Further, Buyer shall be responsible for all severance payments owing to any Transferred Employee except that Seller, promptly after receiving written notice from Buyer (or one of its affiliates) shall reimburse Buyer (or one of its affiliates) for all costs (including payroll taxes) relating to the provision of any severance benefits and payments made to any Transferred Employee, up to a maximum reimbursement, when combined with any reimbursement of severance pursuant to Section 7.2(a) of the Stock Purchase Agreement, of $700,000.00. Buyer also shall be responsible for all disability claims filed after Closing with respect to the Transferred Employees, except that Seller shall remain responsible for any long term or short term disability benefits payable under the Spinnaker Industries Short Term and Long Term Disability Plans, to the extent such benefits are insured, the disability began or is found to have begun prior to the Closing Date, and the disability claim was not filed by a former employee of the Buyer (or one of its affiliates) after such Employee was involuntarily terminated from employment by the Buyer (or one of its affiliates). Seller shall cooperate with Buyer in effecting an assignment to Buyer of any policies of insurance for the provision of health or welfare benefits to the Transferred Employees and former employees of Seller and any other individual who is not a Transferred Employee or former employee of Seller and administrative contracts relating thereto, if requested by Buyer. (c) 401(k) PLAN. On or as soon as practicable after the Closing Date, Buyer (or one of its affiliates) shall cause to be maintained for the benefit of Transferred Employees and all former employees of the Seller for whom benefits are owing under the Spinnaker Industries Affiliates' 401(k) Plan (the "PARENT'S 401(k) PLAN") (together referred to as the "401(k) EMPLOYEES") a defined contribution plan intended to be qualified under Section 401(k) of the Code ("BUYER'S 401(k) PLAN"). As soon as practicable after the Closing Date, but in any event prior to the transfer referred to herein, Buyer shall deliver to Seller a copy of the most recent favorable determination letter for the Buyer's 401(k) Plan, or evidence that such determination letter is not necessary, or evidence of an application timely filed with the IRS for such a letter with respect to a newly adopted plan. In addition, if the Buyer's 401(k) Plan is a newly adopted plan for which a determination letter is necessary, Buyer shall make or cause to be made timely any and all amendments requested by the IRS in order to ensure that the Buyer's 401(k) Plan meets the requirements to ensure it receives a favorable determination letter. As soon as practicable thereafter, Seller shall direct the trustee of the trust funding Parent's 401(k) Plan to transfer to the trustee of the trust funding Buyer's 401(k) Plan the aggregate individual account balances of the 401(k) Employees (whether or not vested). Individual account balances shall be valued as of the date of transfer, and the transfer shall be in cash or in kind, as determined by Buyer, except that outstanding loan balances shall be transferred in the form of notes or other appropriate documents evidencing such loans. Prior to the date of the transfer, Seller or its affiliates shall have contributed all contributions (including salary deferral and matching contributions) attributable to service performed by the 401(k) Employees through the Closing Date. Following such transfer, Buyer or one of its affiliates shall be responsible for liabilities attributable to 401(k) Employees under the Buyer's 401(k) Plan. In the event that the Buyer fails to obtain a favorable determination letter from the IRS in respect of the Buyer's 401(k) Plan, the Buyer shall indemnify Seller and Parent, from and after the Closing Date, against, and agrees to hold Seller and Parent harmless from, any and all damages incurred or suffered by Seller and Parent as a result of the Buyer's failure to satisfy the requirements of this SECTION 6.2(c). (d) NO RIGHTS. Nothing in this Section shall be construed to give any employee or former employee of Seller (or any beneficiary thereof) any rights of any kind, including any right to continued employment with Buyer or the right to any particular terms of employment, nor shall anything contained in this Section be construed to prevent Buyer or any of its affiliates from terminating or modifying any benefit plan that they may establish or assume. (e) EMPLOYEES. Buyer shall offer employment to all of Seller's employees effective as of the Closing Date on terms and, for the balance of the 1999 calendar year, with compensation and benefits substantially similar to those in force immediately prior to the Closing Date (the "TRANSFERRED EMPLOYEES"). 6.3 NOTIFICATION OF CERTAIN MATTERS. Parent and Seller shall give prompt notice to Buyer, and Buyer shall give prompt notice to Parent and Seller, of (i) the occurrence or non-occurrence of any event, the occurrence or nonoccurrence of which would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate and (ii) any failure of Parent or Seller or Buyer, as the case may be, to comply with or 82 satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. 6.4 PUBLIC ANNOUNCEMENTS. Buyer and Seller shall consult with each other before issuing any press release or otherwise making any public statements with respect to the transactions contemplated hereby and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by Law or any listing agreement with or rule of the National Association of Securities Dealers, Inc. 6.5 CUSTOMER RETENTION. To the extent permitted by law or applicable regulation, Parent and Seller shall use reasonable efforts to assist Buyer in its efforts to retain Seller's customers. Such efforts may include making introductions of Buyer's employees to such customers, assisting in the mailing of information prepared by Buyer and reasonably acceptable to Parent and Seller, to such customers and actively participating in any "transitional marketing programs as the parties may agree upon. 6.6 TAX COOPERATION AND INDEMNIFICATION. (a) Seller, Parent and Buyer shall each, and shall cause their respective affiliates to, provide the other party with such cooperation, assistance and information as any of them may reasonably request in respect of Taxes of the Business or the Purchased Assets, the preparation of any Tax Return, including Tax Returns relating to transfer Taxes, amended Tax Return or claim for refund in respect of the Purchased Assets, or the participation in or conduct of any audit or other examination by any taxing authority or judicial or administrative proceeding relating to liability for Taxes of the Purchased Assets. Such cooperation and information shall include (i) providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules and relevant workpapers, relevant documents relating to rulings or other determinations by taxing authorities and relevant records concerning the ownership and Tax basis of property, which any such party may possess, and (ii) making employees available on a mutually convenient basis to provide explanations of any documents or information provided. (b) From and after the Closing Date, to the extent a Tax is imposed on Buyer with respect to the Purchased Assets or Business for any period ending on or before the Closing Date ("PRE-CLOSING PERIOD"), Parent and Seller jointly and severally agree to pay the amount of such Tax, on a Grossed-Up Basis, plus any additional penalties and interest incurred in the payment of such Tax, to the appropriate Taxing Authority or to Buyer, as appropriate, within the later of 30 days of receipt of notice of such Tax or final resolution of any dispute relating to such Tax. If such Tax is paid by Buyer, Parent and Seller jointly and severally agree to reimburse Buyer the amount of such Tax, on a Grossed-Up Basis, plus any additional penalties and interest incurred in the payment of such Tax. (c) From and after the Closing Date, to the extent a Tax (other than a Tax described in the first sentence of SECTION 6.6(b)) is imposed on Parent or Seller with respect to the Purchased Assets or Business for any period after the Closing Date ("POST-CLOSING PERIOD"), Buyer agrees to pay the amount of such Tax, on a Grossed-Up Basis, plus any additional penalties and interest incurred in the payment of such Tax, to the appropriate Taxing Authority within the later of 30 days of receipt of notice of such Tax or final resolution of any dispute relating to such Tax. If such Tax is paid by Parent or Seller, Buyer agrees to reimburse Seller the amount of such Tax, on a Grossed-Up Basis, plus any additional penalties and interest incurred in the payment of such Tax. (d) (i) If any Taxing Authority or other person asserts a claim with respect to Taxes of the Purchased Assets or Business (a "TAX CLAIM"), then the party hereto first receiving notice of such Tax Claim properly payable by another party to this Agreement (the "RESPONSIBLE PARTY") shall provide written notice thereof to the Responsible Party within 30 days of having received such notice; PROVIDED, HOWEVER, that the failure of a party to give such prompt notice to the Responsible Party shall not relieve such Responsible Party of any of its obligations under this SECTION 6.6. Such notice shall specify in reasonable detail the basis for such Tax Claim and shall include a copy of any relevant correspondence received from the Taxing Authority or other person. 83 (ii) If within 60 days after receiving a Tax Claim or written notice of such a Tax Claim with respect to Pre-Closing Period Taxes from the Buyer, Parent or Seller notifies the Buyer that Parent or Seller desires to defend Buyer with respect to the Tax Claim, then Parent or Seller shall have the right to defend or prosecute, at its sole cost, expense and risk, such Tax Claim by all appropriate proceedings, which proceedings shall be defended or prosecuted diligently by Parent or Seller; PROVIDED, HOWEVER, Parent or Seller shall not, without the prior written consent of Buyer, enter into any compromise or settlement of such Tax Claim that would result in any Tax detriment to Buyer; and PROVIDED FURTHER, that Buyer may, at the sole cost and expense of Buyer, at any time prior to its delivery of the notice referred to in the first sentence of SECTION 6.6(d)(i) file any motion, answer or other pleadings or take any other action that Buyer reasonably believes to be necessary or appropriate to protect its interests. So long as Parent or Seller is defending or prosecuting a Tax Claim, Buyer shall provide or cause to be provided to Parent or Seller any information reasonably requested by Parent or Seller relating to such Tax Claim, and Buyer shall otherwise cooperate with Parent or Seller and its representatives in good faith in order to contest effectively such Tax Claim. Parent or Seller shall inform Buyer of all developments and events relating to such Tax Claim (including without limitation, providing to Buyer copies of all written materials relating to such Tax Claim), and Buyer or its authorized representatives shall be entitled, at the expense of Buyer, to participate in, all conferences, meetings and proceedings relating to such Tax Claim. (iii) If Parent or Seller fails to notify Buyer within 60 days after receiving a Tax Claim or a written notice of such a Tax Claim with respect to Pre-Closing Period Taxes from Buyer that Parent or Seller desires to defend the Tax Claim pursuant to this SECTION 6.6(d) or, if after delivery of such notice, Parent or Seller fails to reasonably defend or prosecute such Tax Claim, then Buyer shall at any time thereafter have the right (but not the obligation) to defend or prosecute, at the sole cost, expense and risk of Buyer, such Tax Claim. Buyer shall have full control of such defense or prosecution and such proceedings, including any settlement or compromise thereof. If requested by Buyer, Parent or Seller shall cooperate in good faith with Buyer and its authorized representatives in order to contest effectively such Tax Claim. Parent or Seller may participate in, but not control any defense, prosecution, settlement or compromise of any Tax Claim controlled by Buyer pursuant to this SECTION 6.6(d)(iii), and shall bear its own costs and expenses with respect thereto. (e) Parent and Seller shall pay all transfer, real property transfer, stock transfer and other similar taxes and fees ("TRANSFER TAXES") arising out of or in connection with the transactions effected pursuant to this Agreement, and shall indemnify, defend, and hold harmless Buyer and its respective affiliates with respect to such Transfer Taxes. Parent or Seller shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. (f) No amounts of indemnity for Tax payments shall be payable as a result of a claim under this Section unless and until the party seeking indemnity has suffered, incurred, sustained or become subject to Taxes, penalties or interest in excess of $25,000, in which case such party shall be entitled to seek indemnity for all Taxes, penalties or interest in excess of such $25,000 amount. All such indemnification payments shall be made on a Grossed-Up Basis. (g) All rights and obligations of the parties with respect to indemnification under this Section shall survive for the applicable statute of limitations (including any extensions) for the Tax for which such claim of indemnification is based upon. 6.7 BULK TRANSFER LAWS. Buyer hereby waives compliance by Seller and Parent with the laws of any jurisdiction relating to bulk transfers which may be applicable in connection with the transfer of the Purchased Assets to Buyer; PROVIDED, HOWEVER, that Seller and Parent shall indemnify, defend and hold Buyer and its affiliates and representatives harmless from and against any and all Losses (as defined in SECTION 10.3) directly or indirectly arising out of, or resulting from, or relating to any failure to comply with such laws. 6.8 NON-COMPETITION. 84 (a) For a period commencing on the Closing Date and terminating on the third anniversary thereof (the "PERIOD"), as an inducement to Buyer to execute this Agreement and complete the transactions contemplated hereby, and in order to preserve the goodwill associated with the Business, Parent and Seller will not (1) engage in, continue in, participate in or have any material interest in any sole proprietorship, partnership, corporation or business that is engaged primarily or in any material respect in the business of the manufacture, sale or distribution of pressure sensitive and water activated tape and industrial electrical tape serving either the retail or industrial end markets (the "PROHIBITED BUSINESS") in North America (the "TERRITORY"), (2) consult with, advise or assist in any way, whether or not for consideration, any corporation, partnership, firm or other business organization which is now or becomes a competitor of Buyer in any aspect with respect to the Prohibited Business, including, but not limited to, with respect to the Prohibited Business, advertising or otherwise endorsing the products of any such competitor, soliciting customers or otherwise serving as an intermediary for any such competition or engaging in any form of business transaction on other than an arms'-length basis with any such competitor; or (3) unless Buyer has terminated such Transferred Employee, solicit for employment any Transferred Employee that has been employed by Buyer, without the prior consent of Buyer; PROVIDED, HOWEVER, that nothing herein shall be deemed to prevent (i) Parent or Seller from acquiring through market purchases and owning, solely as an investment, less than five percent of the equity securities of any class of any issuer whose shares are registered under Section 12(b) or 12(g) of the Exchange Act, and are listed or admitted for trading on any United States national securities exchange or are quoted on the Nasdaq National Market, or any similar system of automated dissemination of quotations of securities prices in common use, so long as neither Parent nor Seller is a member of any "control group" (within the meaning of the rules and regulations of the United States Securities and Exchange Commission) of any such issuer, (ii) any offer by Parent or Seller to employ a person in the Prohibited Business (except as set forth in this Section), or (iii) Parent or Seller from being acquired by a person engaged in any business in competition with the Prohibited Business of Seller. The parties agree that Buyer may sell, assign or otherwise transfer this covenant not to compete, in whole or in part, to any person, corporation, firm or entity that succeeds to the Business. The parties further agree that the geographic scope of this covenant not to compete shall extend to any city, county or other political subdivision of any country in the Territory, each of which is deemed to be separately named herein. Recognizing the specialized nature of the Purchased Assets transferred to Buyer and the scope of competition, Seller and Parent each acknowledge the geographic scope of this covenant not to compete to be reasonable. The parties intend that the covenant contained in this Section shall be construed as a series of separate covenants, one for each city, county or political subdivision of each country in the Territory, each of which is deemed to be separately named herein, each for a series of one-year periods within the Period. Except for geographic coverage and periods of effectiveness, each such separate covenant shall be identical in terms. If in any judicial proceeding a court shall refuse to enforce any of the separate covenants deemed included in this Section, then such unenforceable covenant shall be deemed eliminated for the purpose of that proceeding to the extent necessary to permit the remaining separate covenants to be enforced. In the event a court of competent jurisdiction determines that the provisions of this covenant not to compete are excessively broad as to duration, geographic scope or activity, it is expressly agreed that this covenant not to compete shall be construed so that the remaining provisions shall not be affected, but shall remain in full force and effect, and any such over broad provisions shall be deemed, without further action on the part of any person, to be modified, amended and/or limited, but only to the extent necessary to render the same valid and enforceable in such jurisdiction. (b) Parent and Seller each agree with Buyer that the provisions and restrictions contained in this Section are necessary to protect the legitimate continuing interests of Buyer in acquiring the Purchased Assets, and that any violation or breach of these provisions will result in irreparable injury to Buyer for which a remedy at law would be inadequate. Parent and Seller each agrees with Buyer that in the event of a violation or breach and regardless of any other provision contained in this Agreement, Buyer shall be entitled to injunctive and other equitable relief, including specific performance, as a court may grant 85 after considering the intent of this Section, and Buyer shall not be entitled to any other form of relief from such violation or breach. 6.9 FURTHER TRANSFER MATTERS. Effective on the Closing Date, Seller and Parent hereby constitute and appoint Buyer the true and lawful attorney-in-fact of Seller or Parent, with full power of substitution, in the name of Seller or Parent, but on behalf of and for the sole benefit of Buyer: (i) to demand and receive from time to time any and all of the Purchased Assets and to make endorsements and give receipts and releases for and in respect of the same and any part thereof and for the Business, (ii) to institute, prosecute, compromise and settle any and all actions or proceedings that Buyer may deem proper in order to collect, assert or enforce any claim, right or title of any kind in or to the Purchased Assets or Business, (iii) to defend or compromise any or all actions or proceedings in respect of any of the Purchased Assets or Business, and (iv) to do all such acts and things in relation to the matters set forth in the preceding clauses (i) through (iii) as Buyer shall deem desirable. Seller and Parent hereby acknowledges that the appointment hereby made and the powers hereby granted are coupled with an interest and are not and shall not be revocable by it in any manner or for any reason. At Closing, Seller shall provide Buyer with a written power of attorney in form and substance appropriate to authorize and carry out the above. 6.10 PRORATIONS. The following prorations relating to the Purchased Assets and the ownership and operation of the Business will be made as of the Closing Date, with Seller liable to the extent such items relate to any time period prior to the Closing Date and Buyer liable to the extent such items relate to periods beginning with and subsequent to the Closing Date: (a) real estate taxes on or with respect to the Real Property; (b) rents, additional rents, taxes and other items payable by or to Seller under the Real Property Leases; (c) the amount of charges for sewer, water, telephone, electricity and other utilities relating to the Real Property and the real property subject to the Real Property Leases; and (d) all other items (excluding personal property taxes and other Taxes) normally adjusted in connection with similar transactions. Except as otherwise agreed by the parties, the net amount of all such prorations will be settled and paid on the Closing Date. If the Closing shall occur before a real estate tax rate is fixed, the apportionment of taxes shall be based upon the tax rate for the preceding year applied to the latest assessed valuation. 6.11 RELEASE OF LIENS. Seller, at or before Closing, shall release of record, the liens listed on SCHEDULE 3.24 of the Seller Disclosure Schedule. ARTICLE VII CONDITIONS OF CLOSING 7.1 CONDITIONS TO OBLIGATION OF EACH PARTY. The respective obligations of each party to effect the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Closing Date of the following conditions: (a) NO ORDER. No federal or state governmental or regulatory authority or other agency or commission, or federal or state court of competent jurisdiction, shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which restricts, prevents or prohibits consummation of the transactions contemplated by this Agreement. (b) HART-SCOTT-RODINO ACT. Early termination shall have been granted or applicable waiting periods shall have expired under the HSR Act. (c) CONSENT OF MUNICIPALITY. Seller shall have received consent from any municipality required to provide consent to the transfer of Real Property pursuant to this Agreement. 7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to effect the transactions contemplated hereby are also subject to the following conditions: 86 (a) REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties of Seller and Parent contained in this Agreement, including giving effect to any update to the Seller Disclosure Schedule, shall be true and correct in all material respects (except that where any such statement in a representation or warranty expressly includes a standard of materiality, such statement shall be true and correct in all respects) as of the Closing Date (except to the extent such representations and warranties speak as of an earlier date) as though made on and as of the Closing Date, and Buyer shall have received a certificate signed on behalf of Seller by the Chief Executive Officer or President and the Chief Financial Officer of Seller to the foregoing effect. (b) AGREEMENTS AND COVENANTS. Seller shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing Date. (c) CONSENTS OBTAINED. All consents, waivers, approvals, authorizations or orders required to be obtained and all filings required to be made by Seller for the authorization, execution and delivery of this Agreement and the consummation by it of the transactions contemplated hereby shall have been obtained and made by Seller, except those for which failure to obtain such approvals or make such filings would not individually or in the aggregate have a Material Adverse Effect with respect to the Business. (d) NO CHALLENGE. There shall not be pending any action, proceeding or investigation before any court or administrative agency or by a government agency (i) challenging or seeking material damages in connection with the transactions hereby contemplated, (ii) seeking to restrain, prohibit or limit the exercise of full rights of ownership or operation by Buyer of all or any portion of the Purchased Assets, or (iii) seeking to recover against the proceeds of the transactions contemplated hereby, which in any case is reasonably likely to have a Material Adverse Effect with respect to the Purchased Assets. (e) NO MATERIAL ADVERSE CHANGES. Since the date of the Agreement, there has not been any change in the financial condition, results of operations or business of Seller or the Business, taken as a whole, that either individually or in the aggregate would have a Material Adverse Effect with respect to the Purchased Assets, and Buyer shall have received a certificate of the Chief Executive Officer or President and the Chief Financial Officer of Seller to such effect. (f) OPINION OF COUNSEL. Buyer shall have received from Jenkens & Gilchrist, a Professional Corporation, independent counsel to Seller ("SELLER'S COUNSEL"), an opinion dated the Closing Date, substantially in the form attached as EXHIBIT A. (g) REAL PROPERTY MATTERS. (i) Buyer shall have received an estoppel and consent certificate (dated not more than 30 days prior to the Closing Date) from each landlord under a Real Property Lease reasonably acceptable in form to Buyer; (ii) Buyer shall have received, at Seller's sole cost and expense, a policy of title insurance, dated as of the Closing Date and issued by Buyer's title insurance company, insuring the owner or tenant of the applicable parcel of Real Property or real property subject to a Real Property Lease, free of all Liens including, without limitation, all liens listed on SECTION 3.24 of the Seller Disclosure Schedule, together with, at Seller's sole cost and expense, an ALTA/ACSM survey for each such parcel reasonably acceptable to Buyer. Seller shall deliver to Buyer's title insurance company a title affidavit sufficient to allow Buyer's title insurance company to omit the customary standard exceptions from the policy of title insurance; (iii) Buyer shall have received a nondisturbance agreement, in form reasonably acceptable to Buyer, from each holder of a mortgage or deed of trust affecting any Real Property Lease; (iv) Buyer shall have received special warranty deeds in proper statutory form for recording and otherwise in form and substance reasonably satisfactory to Buyer conveying title to the Real Property, if any, in accordance with this Agreement and an assignment of each Real Property Lease conveying title to each Real Property Lease in accordance with this Agreement in a form reasonably acceptable to Buyer; 87 (h) FINANCING AND EMPLOYMENT RELEASES. Buyer shall have received releases or other documentation in form reasonably satisfactory to Buyer evidencing the satisfaction of obligations of Seller under or pursuant to the tesa Credit Agreement, any relevant employment agreements and the tesa Note; and (i) WARRANTY CLAIM. On or before April 30, 1999, Seller shall have asserted in writing a warranty claim in respect of the repair of the floor and foundation at the Carbondale, Illinois facility and shall have assigned all its rights under such warranty claim to Buyer. 7.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligations of Parent and Seller to effect the transactions contemplated hereby are also subject to the following conditions: (a) REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties of Buyer set forth in this Agreement, including giving effect to any update to the Buyer Disclosure Schedule, shall be true and correct in all material respects (except that where any such statement in a representation or warranty expressly includes a standard of materiality, such statement shall be true and correct in all respects) as of the Closing Date (except to the extent such representation and warranties speak as of an earlier date), as though made on and as of the Closing Date, and Seller shall have received a certificate signed on behalf of Buyer by the Chief Executive Officer or President and the Chief Financial Officer of Buyer to the foregoing effect. (b) AGREEMENTS AND COVENANTS. Buyer shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing Date. (c) CONSENTS UNDER AGREEMENTS. All consents, waivers, approvals, authorizations or orders required to be obtained, and all filings required to be made by Buyer for the authorization, execution and delivery of this Agreement and the consummation by it of the transactions contemplated hereby shall have been obtained and made by Buyer, except where failure to obtain any consents, waivers, approvals, authorizations or orders required to be obtained or any filings required to be made would not have a Material Adverse Effect with respect to Buyer. (d) NO CHALLENGE. There shall not be pending any action, proceeding or investigation before any court or administrative agency or by a government agency (i) challenging or seeking material damages in connection with transactions hereby contemplated or (ii) seeking to restrain, prohibit or limit the exercise of full rights of ownership or operation by Buyer of all or any portion of the Purchased Assets, which in either case would have a Material Adverse Effect with respect to the Purchased Assets. (e) NO MATERIAL ADVERSE CHANGES. Since the date of the Agreement, there has not been any change in the financial condition, results of operations or business of Buyer that either individually or in the aggregate would have a Material Adverse Effect with respect to Buyer. Seller shall have received a certificate of the Chief Executive Officer or President and the Chief Financial Officer of Buyer to such effect. (f) OPINION OF COUNSEL. Seller and Parent shall have received from Morgan, Lewis & Bockius LLP, independent counsel to Buyer ("BUYER'S COUNSEL"), an opinion dated the Closing Date, substantially in the form attached as EXHIBIT B. ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER 8.1 TERMINATION. This Agreement may be terminated at any time prior to the Closing Date: (a) by mutual consent of Buyer, Seller and Parent; (b) by either Parent, Buyer or Seller if any approval of stockholders required for the consummation of the transactions contemplated hereby shall not have been obtained by reason of the failure to obtain the required vote at a duly held meeting of such stockholders or at any adjournment or postponement thereof; 88 (c) by Seller, Parent or Buyer if there has been a breach in any material respect (except that where any statement in a representation or warranty expressly includes a standard of materiality, such statement shall have been breached in any respect) of any representation, warranty, covenant or agreement, set forth in this Agreement, on the part of any party, which breach has not been cured within 10 business days following receipt by the nonterminating party of notice of such breach or other condition, or which breach by its nature, cannot be cured prior to the Closing Date; PROVIDED, HOWEVER, this Agreement may not be terminated pursuant to this clause (c) by the breaching party; (d) by either Buyer, Parent or Seller if any permanent injunction preventing the consummation of the transactions contemplated hereby shall have become final and nonappealable or if any applicable Law or any rule or regulation thereunder shall hereafter be enacted or becomes applicable that makes the transactions contemplated hereby or the consummation of the Closing illegal; (e) by either Buyer, Parent or Seller if the transactions contemplated hereby shall not have been consummated by July 31, 1999, for a reason other than the failure of the party seeking termination to comply with its obligations under this Agreement; PROVIDED, HOWEVER, that in the event early termination shall not have been granted or applicable waiting periods shall not have expired under the HSR Act as of such date, the parties may agree to extend such date for up to two additional 30 day periods, with such agreement not to be unreasonably withheld, and, further, provided, if the Put Right in SECTION 10.2 of the Stock Purchase Agreement has been exercised, the parties shall in good faith close the transaction contemplated hereby as soon as possible after such exercise. (f) by either Buyer, Parent or Seller if any regulatory authority has denied approval of the transactions contemplated hereby, and neither Buyer nor Seller has, within 30 days after the entry of such order denying approval, filed a petition seeking review of such order as provided by applicable law; or (g) by Buyer in the event it shall have notified Parent and Seller of its intention to terminate this Agreement pursuant to SECTION 6.11 within the time period set forth therein. 8.2 EFFECT OF TERMINATION. In the event of the termination of this Agreement pursuant to SECTION 8.1, this Agreement shall forthwith become void and all rights and obligations of any party shall cease except as set forth in SECTION 5.4(c) of this Agreement; PROVIDED, HOWEVER, nothing herein shall relieve any party from liability for any willful breach of this Agreement or shall restrict either party's rights in the case thereof. 8.3 WAIVER. At any time prior to the Closing Date, the parties may (a) extend the time for the performance of any of the obligations or other acts of the other party, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. ARTICLE IX INDEMNIFICATION 9.1 INDEMNIFICATION. Subject to the provisions of this Article, Seller shall indemnify Buyer, its stockholders, officers, directors, employees, agents and affiliates (collectively, the "BUYER INDEMNITEES") in respect of, and hold each of them harmless from and against, and shall pay the full amount of, on a Grossed-Up Basis (as defined in SECTION 10.3), any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject resulting from, arising out of or relating to: (i) any causes of action asserted or other legal proceedings initiated on the part of any of the stockholders of Seller relating in any way to claims based on the failure to obtain shareholder approval of the sale of Parent's assets; (ii) any employee pension benefit plan subject to Title IV of ERISA that is maintained by Seller or any of its "controlled group," within the meaning of Section 4001(a)(15) of ERISA, other than any Plans; (iii) severance obligations occurring within six months of the Closing Date in connection with the agreements described on EXHIBIT C; and (iv) the nonfulfillment of or failure to perform any covenant or agreement on the part of Seller contained in SECTIONS 5.6 and 6.7. 89 9.2 PROCEDURES FOR INDEMNIFICATION. Any claims for indemnification by any party entitled to indemnification hereunder (an "INDEMNIFIED PARTY") from any party hereunder (an "INDEMNITOR") under this ARTICLE IX shall be made by an Indemnified Party by delivery of a written notice to the Indemnitor requesting indemnification (an "INDEMNIFICATION CLAIM") and specifying the basis on which indemnification is sought and the amount of asserted Losses. Indemnitor shall have 30 days after the date on which the Indemnitor receives the notice of an Indemnification Claim to object to such Indemnification Claim by delivery of a written notice of such objection to the Indemnified Party specifying in reasonable detail the basis for such objection. If within 30 days after the date on which the Indemnitor receives the notice of the Indemnification Claim, the Indemnitor has not delivered to the Indemnified Party a notice objecting to all or any portion of the claimed Loss and setting forth the amount of such claimed indemnification for such Loss objected to and the reasons for such objection, the Indemnified Party shall be entitled to indemnification for such Loss, and the Indemnitor shall promptly pay the full amount of such Loss. If, within 30 days after the date on which the Indemnitor receives the notice of an Indemnification Claim, the Indemnitor delivers to the Indemnified Party an objection to all or any portion of the claimed Loss, setting forth the amount of such Loss objected to and the reasons for such objection, the Indemnified Party shall be entitled to reimbursement for the portion of such Loss not objected to by the Indemnitor and the Indemnitor shall promptly pay the full amount of so much of the Loss as to which the Indemnitor did not object. (a) Upon determination of the amount of an Indemnification Claim, whether by agreement between the Indemnitor and the Indemnified Party or by any final adjudication, the Indemnitor shall pay the amount of such Indemnification Claim within 5 days of the date such amount is determined. (b) The rights accorded to Indemnified Parties hereunder shall be in addition to any rights that any Indemnified Party may have at law or in equity. (c) Any payment under this Article shall be treated for Tax purposes as an adjustment of the Purchase Price to the extent such characterization is proper and permissible under the applicable U.S. Tax law, including the Code, Treasury regulations, court decisions and administrative promulgations or, alternatively, by Buyer as an offset to a Tax benefit item, if such characterization is permissible under such Tax law. (d) In no event shall the aggregate liability of Seller and Parent for claims asserted pursuant to Section 9.1(i) and 9.1(iii) of this Agreement and Section 11.1(i) and 11.1(iii) of the Stock Purchase Agreement (excluding indemnification with respect to the payment of Taxes, penalties, Brighton Governmental Claims, interest and collection costs thereof) exceed $700,000. 90 ARTICLE X GENERAL PROVISIONS 10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS. Except as otherwise set forth herein, the representations and warranties of the parties shall expire at Closing. The covenants and agreements of the parties shall expire at Closing; PROVIDED, HOWEVER, that the covenants and agreements contained in SECTIONS 5.4(c), 5.6, 5.7, 6.2, 6.6, 6.8 and 6.9 shall survive Closing and expire in accordance with their respective terms, provided that to the extent obligations require repeated performance or performance from time to time, expiration shall occur only upon the final performance of the obligation. 10.2 NOTICES. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed given if delivered personally, telecopied (with confirmation), mailed by certified mail (postage prepaid, return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice) and shall be effective upon receipt:
(a) If to Parent or Seller: Spinnaker Industries, Inc. 1700 Pacific Ave., Suite 1600 Dallas, Texas 75201 Telecopier: (214) 855-0093 Attention: President With copies to: Jenkens & Gilchrist, a Professional Corporation 1445 Ross Ave., Suite 3200 Dallas, Texas 75202 Telecopier: (214) 855-4300 Attention: Ronald J. Frappier Crouch & Hallett, L.L.P. 717 North Harwood Street Suite 1400 Dallas, Texas 75201 Telecopier: (214) 922-4193 Attention: Timothy R. Vaughan (b) If to Buyer: Intertape Polymer Group Inc. 110E Montee de Liesse St. Laurent, Quebec H4T IN4 Canada Telecopier: (514) 731-5477 Attention: Andrew M. Archibald With a copy to: Morgan, Lewis & Bockius LLP 101 Park Avenue New York, New York 10178 Telecopier: (212) 309-6273 Attention: Nancy H. Corbett
91 10.3 CERTAIN DEFINITIONS. For purposes of this Agreement, the term: (a) "AFFILIATE" means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned person; including, without limitation, any partnership or joint venture in which any person (either alone, or though or together with any other subsidiary) has, directly or indirectly, an interest of 5% or more; (b) "BUSINESS DAY" means any day other than a day on which federally-chartered banks are required or authorized to be closed; (c) "CONTROL" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of stock or as trustee or executor, by contract or credit arrangement or otherwise; (d) "GROSSED-UP BASIS" means, when used to describe the basis on which the payment of a specified sum is to be made, a basis such that the amount of such payment, after being reduced by the amount of all Taxes imposed on the recipient of such payment as a result of the receipt or accrual of such payment and after taking into account the Tax benefit of any deductions attributable to such Taxes and/or payments that are currently available to the recipient of such payment, will equal the specified sum; (e) "LIEN" shall mean any conditional sale agreement, default of title, easement, encroachment, encumbrance, hypothecation, infringement, lien, mortgage, pledge, reservation, restriction, security interest, title retention or other security arrangement, or any adverse right or interest, charge, or claim of any nature whatsoever of, on, or with respect to any property or property interest, other than (i) liens for current property Taxes not yet due and payable, and (ii) liens which do not materially impair the use of, or title to, or value of the assets subject to such lien; (f) "LOSS" shall mean any and all demands, claims, actions or causes of action, assessments, damages, liabilities, costs and expenses, including interest and penalties, and reasonable attorneys' fees and expenses relating thereto (but excluding lost profits or consequential or incidental damages); (g) "MATERIAL ADVERSE EFFECT" means, with respect to Buyer, Parent, Seller or Business, (i) any adverse effect on the business, assets, properties, liabilities, prospects, results of operations or financial condition of, and which is material with respect to, such party (or the Business), or (ii) any effect that materially impairs the ability of such party to consummate the transactions contemplated hereby; PROVIDED, HOWEVER, that Material Adverse Effect shall not be deemed to include the impact of (A) actions contemplated by this Agreement, (B) changes in laws and regulations or interpretations thereof that are generally applicable to the manufacturing industry and (C) changes in generally accepted accounting principles that are generally applicable to the manufacturing industry; (h) "PERSON" means an individual, corporation, partnership, association, trust, unincorporated organization, other entity or group (as defined in Section 13(d) of the Exchange Act); and (i) "SUBSIDIARY" or "SUBSIDIARIES" of Seller, Parent, Buyer or any other person, means any corporation, partnership, joint venture or other legal entity of which either Seller, Parent, Buyer, or such other person, as the case may be (either alone or through or together with any other subsidiary), owns, directly or indirectly, 50% or more of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. 10.4 HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 10.5 SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good 92 faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. 10.6 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties and supersedes all prior agreements and undertakings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof and, except as otherwise expressly provided herein, are not intended to confer upon any other person any rights or remedies hereunder. 10.7 ASSIGNMENT. This Agreement shall not be assigned by operation of law or otherwise, except that Buyer may assign all or any of its rights hereunder to any affiliate provided that no such assignment shall relieve Buyer of its obligations hereunder. 10.8 PARTIES IN INTEREST. This Agreement shall be binding upon and inure solely to the benefit of each party and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 10.9 GOVERNING LAW; VENUE. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law. 10.10 COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by the different parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 10.11 TIME IS OF THE ESSENCE. Time is of the essence with respect to this Agreement. 10.12 AMENDMENT. This Agreement may be amended by the agreement of the parties and in accordance with their applicable charter documents and applicable Law. 10.13 WAIVER OF JURY TRIAL. Each of Seller and Buyer waive their respective rights to a trail by jury of any claim or cause of action based upon or arising out of or related to this agreement, any assignment or the transactions contemplated hereby, in any action, proceeding or other litigation of any type brought by any party against the other parties, whether with respect to contract claims, tort claims, or otherwise. Each of Seller and Buyer agree that any such claim or cause of action shall be tried by a court trial without a jury. Without limiting the foregoing, the parties further agree that their respective right to a trial by jury is waived by operation of this Section as to any action, counterclaim or other proceeding which seeks, in whole or in part, to challenge the validity or enforceability of this Agreement, any assignment or any provision hereof or thereof. This waiver shall apply to any subsequent amendments, renewals, supplements or modifications to this Agreement or any assignment. 10.14 CONSENT TO JURISDICTION. The parties hereto each hereby irrevocably submit to the exclusive jurisdiction of the state courts of the State of Delaware and to the jurisdiction of the United States District Court of Delaware for the purposes of any suit, action or other proceeding arising out of or based upon this Agreement or the subject matter hereto brought by any other party hereto. Each party hereto, to the extent permitted by applicable law, hereby waives and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding brought in such courts, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such Court. 93 IN WITNESS WHEREOF, Seller, Parent and Buyer have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
SPINNAKER INDUSTRIES, INC. ("Parent") By: /s/ Ned M. Fleming, III Name: Ned M. Fleming, III Title: President SPINNAKER ELECTRICAL TAPE COMPANY ("Seller") By: /s/ Mark R. Matteson Name: Mark R. Matteson Title: Vice President INTERTAPE POLYMER GROUP INC. ("Buyer") By: /s/ Andrew M. Archibald Name: Andrew M. Archibald Title: CFO, Vice President Administration
94 EX-2.4 8 EXHIBIT 2.4 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- IPG HOLDINGS LP INTERTAPE POLYMER GROUP INC. NOTE AGREEMENT DATED AS OF JULY 1, 1999 RE: U.S. $25,000,000 7.66% SENIOR GUARANTEED NOTES, SERIES A, DUE 2005 U.S. $112,000,000 7.81% SENIOR GUARANTEED NOTES, SERIES B, DUE 2009 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE Parties..................................................................... 1 SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT......................... 1 Section 1.1. Description of Notes........................................ 1 Section 1.2. Commitment, Closing Date.................................... 2 Section 1.3. Other Agreements............................................ 2 Section 1.4. Guaranty Agreements......................................... 2 SECTION 2. PREPAYMENT OF NOTES......................................... 3 Section 2.1. Required Prepayments........................................ 3 Section 2.2. Optional Prepayment with Premium............................ 3 Section 2.3. Notice of Certain Prepayments............................... 3 Section 2.4. Application of Prepayments.................................. 4 Section 2.5. Direct Payment.............................................. 4 SECTION 3. REPRESENTATIONS............................................. 4 Representations of the General Partner, the Issuer and the Section 3.1. Company..................................................... 4 Section 3.2. Representations of the Purchasers........................... 4 SECTION 4. CLOSING CONDITIONS.......................................... 6 Section 4.1. Conditions.................................................. 6 Section 4.2. Waiver of Conditions........................................ 7 SECTION 5. COMPANY, GENERAL PARTNER AND ISSUER COVENANTS............... 8 Section 5.1. Corporate or Partnership Existence, Etc..................... 8 Section 5.2. Insurance................................................... 8 Taxes, Claims for Labor and Materials, Compliance with Section 5.3. Laws........................................................ 8 Section 5.4. Maintenance, Etc............................................ 9 Section 5.5. Nature of Business.......................................... 9 Section 5.6. Consolidated Net Worth...................................... 9 Section 5.7. Fixed Charges Coverage Ratio................................ 9 Section 5.8. Leverage Ratio.............................................. 9 Section 5.9. Additional Limitations on Debt.............................. 9 Section 5.10. Limitation on Liens......................................... 10 Section 5.11. Restricted Payments......................................... 11 Section 5.12. Mergers, Consolidations and Sales of Assets................. 12 Section 5.13. Repurchase of Notes......................................... 14 Section 5.14. Transactions with Affiliates................................ 14 Section 5.15. Termination of Pension Plans................................ 14 Section 5.16. Designation of Restricted Subsidiaries...................... 15 Section 5.17. Reports and Rights of Inspection............................ 15 Section 5.18. Substitution of Issuer...................................... 19 SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR..................... 20 Section 6.1. Events of Default........................................... 20 Section 6.2. Notice to Holders........................................... 22 Section 6.3. Acceleration of Maturities.................................. 22 Section 6.4. Rescission of Acceleration.................................. 22 SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS............................ 23 Section 7.1. Consent Required............................................ 23 Section 7.2. Solicitation of Holders..................................... 23
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PAGE Section 7.3. Effect of Amendment or Waiver............................... 23 SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS.................... 24 Section 8.1. Definitions................................................. 24 Section 8.2. Accounting Principles....................................... 35 Section 8.3. Directly or Indirectly...................................... 35 SECTION 9. MISCELLANEOUS............................................... 35 Section 9.1. Registered Notes............................................ 35 Section 9.2. Exchange of Notes........................................... 36 Section 9.3. Loss, Theft, Etc. of Notes.................................. 36 Section 9.4. Expenses, Stamp Tax Indemnity............................... 36 Section 9.5. Powers and Rights Not Waived; Remedies Cumulative........... 37 Section 9.6. Notices..................................................... 37 Section 9.7. Successors and Assigns...................................... 37 Section 9.8. Survival of Covenants and Representations................... 38 Section 9.9. Severability................................................ 38 Section 9.10. Governing Law............................................... 38 Section 9.11. Jurisdiction and Service in Respect of Issuer and Company... 38 Section 9.12. Payments Free and Clear of Taxes............................ 38 Section 9.13. Currency of Payments; Judgments............................. 39 Section 9.14. Captions.................................................... 40 Section 9.15. Interest Act (Canada)....................................... 40 Section 9.16. Language.................................................... 40
ATTACHMENTS TO NOTE AGREEMENT: Schedule I--Names and Addresses of Note Purchasers and Amounts of Commitments Exhibit A-1--Form of 7.66% Senior Guaranteed Note, Series A, due 2005 Exhibit A-2--Form of 7.81% Senior Guaranteed Note, Series B, due 2009 Exhibit B-1--Representations and Warranties of the Issuer and General Partner Exhibit B-2--Representations and Warranties of the Company Exhibit C--Description of Special Counsel's Closing Opinion Exhibit D--Description of Closing Opinion of Counsel to the Company Exhibit E--Description of Closing Opinion of Special U.S. Counsel to the Obligors Exhibit F--Description of Closing Opinion of Counsel to the Obligors as to Matters in Delaware Exhibit G-1--Form of Guaranty Agreement of the Company Exhibit G-2--Form of Guaranty Agreement of IPG (US) Exhibit H--Form of Limited Partnership Agreement ii IPG HOLDINGS LP AND INTERTAPE POLYMER GROUP INC. 110E Montee de Liesse St. Laurent, Quebec H4T 1N4 Canada NOTE AGREEMENT Re: U.S. $25,000,000 7.66% Senior Guaranteed Notes, Series A due 2005 U.S. $112,000,000 7.81% Senior Guaranteed Notes, Series B due 2009 Dated as of July 1, 1999 To the Purchasers named in Schedule I hereto which are signatories to this Agreement Ladies and Gentlemen: The undersigned, IPG Holdings LP, a limited partnership formed under the laws of the State of Delaware (the "ISSUER"), Intertape Polymer Inc., a Canadian corporation and general partner of the Issuer (the "GENERAL PARTNER") and Intertape Polymer Group Inc., a corporation formed under the laws of Canada (the "COMPANY" and, together with the Issuer, the "OBLIGORS"), jointly and severally, agree with you as follows: SECTION 1 DESCRIPTION OF NOTES AND COMMITMENT 1.1. DESCRIPTION OF NOTES. The Issuer will authorize the issue and sale of: (a) U.S. $25,000,000 7.66% Senior Guaranteed Notes, Series A, due May 31, 2005 (the "SERIES A NOTES") to be dated the date of issue, to bear interest from such date at the rate of 7.66% per annum, to be expressed to mature on May 31, 2005 and to be substantially in the form of Exhibit A-1 hereto; and (b) U.S. $112,000,000 7.81% Senior Guaranteed Notes, Series B, due May 31, 2009 to be dated the date of issue, to bear interest from such date at the rate of 7.81% per annum, to be expressed to mature on May 31, 2009 and to be substantially in the form of Exhibit A-2 hereto. The Series A Notes and the Series B Notes are hereinafter collectively referred to as the "NOTES". The Series A Notes and the Series B Notes are each herein referred to as Notes of a "SERIES". The interest on the Notes of each Series shall be payable semiannually on the last day of each May and November in each year (commencing November 30, 1999) and at maturity and shall bear interest on overdue principal (including any overdue, required or optional prepayment of principal) and premium, if any, and on any overdue installment of interest at the Overdue Rate applicable to such Series. Interest on the Notes shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The Notes are not subject to prepayment or redemption at the option of the Issuer prior to their expressed maturity date except on the terms and conditions and in the amounts and with the premium, if any, set forth in SECTION2 of this Agreement. The term "NOTES" as used herein shall include each Note delivered pursuant to this Agreement and the separate agreements with the other purchasers named in Schedule I. You and the other Purchasers named in the Schedule I are hereinafter sometimes referred to as the "PURCHASERS". 1.2. COMMITMENT, CLOSING DATE. Subject to the terms and conditions hereof and on the basis of the representations and warranties hereinafter set forth, the Issuer agrees to issue and sell to you, and you agree to 1 purchase from the Issuer, Notes in the principal amount set forth opposite your name on Schedule I hereto at a price of 100% of the principal amount thereof on the Closing Date (as hereinafter defined). Delivery of the Notes will be made at the offices of Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603 against payment therefor by wire transfer in immediately available funds at the principal office of Bank of America, N.A., New York, New York, ABA #0260-09593, Account #6550-113535 for further credit to: The Toronto-Dominion Bank, New York, Account #0324-8025371, Account Name: IPG Holdings LP, in the amount of the purchase price at 10:00 A.M., Chicago time, on July 15, 1999 or such later date (not later than July 20, 1999) as shall be mutually agreed upon by the Issuer and the Purchasers (the "CLOSING DATE"). The Notes purchased by you on the Closing Date will be delivered to you in the form of a single registered Note (or such greater number of Notes in denominations of at least $500,000 as you may request) in the form attached hereto as Exhibit A for the full amount of your purchase, registered in your name or in the name of your nominee, all as you may specify at any time prior to the Closing Date. 1.3. OTHER AGREEMENTS. Simultaneously with the execution and delivery of this Agreement, the Obligors are entering into similar agreements with other Purchasers under which each other Purchaser agrees to purchase from the Issuer the principal amount of Notes and the Series set opposite such Purchaser's name on Schedule I, and your obligation and the obligations of the Obligors hereunder are subject to the execution and delivery of such similar agreements by the other Purchasers. This Agreement and said similar agreements with the other Purchasers are herein collectively referred to as the "AGREEMENTS". The obligations of each Purchaser under the Agreements shall be several and not joint and no Purchaser shall be liable or responsible for the acts of any other Purchaser. 1.4. GUARANTY AGREEMENTS. The payment by the Issuer of all amounts due with respect to the Notes and performance of all obligations of the Issuer under this Agreement will be unconditionally guaranteed (i) by the Company under a Guaranty Agreement to be dated as of July 1, 1999 (the "GUARANTY AGREEMENT (COMPANY)") from the Company, which Guaranty Agreement shall be in substantially the form attached hereto as Exhibit G-1, and (ii) by IPG (US) under a Guaranty Agreement to be dated as of July 1, 1999 (the "GUARANTY AGREEMENT (IPG (US))") from IPG (US), which Guaranty Agreement shall be substantially in the form attached hereto as Exhibit G-2. The Guaranty Agreement (Company) and the Guaranty Agreement (IPG (US)) are hereafter referred to collectively as the "GUARANTY AGREEMENTS" and individually as a "GUARANTY AGREEMENT". SECTION 2 PREPAYMENT OF NOTES 2.1. REQUIRED PREPAYMENTS. (a) SERIES A NOTES. Except as set forth in SECTION2.2, the Series A Notes are not subject to prepayment or redemption prior to their expressed maturity dates. (b) SERIES B NOTES. The Issuer agrees that on May 31 and November 30 in each year, commencing November 30, 2005 and ending November 30, 2008, both inclusive, the Issuer will prepay and apply and there shall become due and payable on the principal indebtedness evidenced by the Series B Notes, an amount equal to the lesser of (i) $13,440,000 and (ii) the principal amount of the Series B Notes then outstanding. The entire remaining principal amount of the Series B Notes shall become due and payable on May 31, 2009. No premium shall be payable in connection with any required prepayment made pursuant to this SECTION2.1. Upon any partial prepayment of the Series B Notes pursuant to SECTION2.2 or repurchase of Series B Notes pursuant to SECTION5.13, the principal amount of the payment required at maturity of the Series B Notes and each required prepayment of the Series B Notes becoming due under this SECTION2.1 on and after the date of such prepayment or purchase shall be reduced in the same proportion as the aggregate unpaid principal amount of the Notes is reduced as a result of such prepayment or purchase. 2.2. OPTIONAL PREPAYMENT WITH PREMIUM. Subject to SECTION2.4, the Issuer shall have the privilege, at any time and from time to time, of prepaying the outstanding Notes of both Series, either in whole or in part (but if in part then in a minimum principal amount of U.S. $1,000,000 in the aggregate) by payment of the principal amount of the Notes or portion thereof to be prepaid, and accrued interest thereon to the date of such prepayment, together with a premium equal to the Make-Whole Amount, determined as of three Business Days prior to the date of such prepayment pursuant to this SECTION2.2. 2 2.3. NOTICE OF CERTAIN PREPAYMENTS. The Issuer will give notice of any prepayment of the Notes of both Series pursuant to SECTION2.2 to each holder thereof not less than 30 days nor more than 60 days before the date fixed for such optional prepayment specifying (i) such date, (ii) the principal amount of the holder's Notes to be prepaid on such date, (iii) that a Make-Whole Amount may be payable, (iv) the date when such Make-Whole Amount will be calculated, (v) the estimated Make-Whole Amount, and (vi) the accrued interest applicable to the prepayment as of the prepayment date. Notice of prepayment having been so given, the aggregate principal amount of the Notes specified in such notice, together with accrued interest thereon and the Make-Whole Amount, if any, payable with respect thereto shall become due and payable on the prepayment date specified in said notice. Not later than two Business Days prior to the prepayment date specified in such notice, the Issuer shall provide each holder of a Note written notice of the Make-Whole Amount, if any, payable in connection with such prepayment and, whether or not any Make-Whole Amount is payable, a reasonably detailed computation of the Make-Whole Amount. 2.4. APPLICATION OF PREPAYMENTS. In the case of each partial prepayment of the Notes, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes of both Series then outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof. 2.5. DIRECT PAYMENT. Notwithstanding anything to the contrary contained in this Agreement or the Notes, in the case of any Note owned by you or your nominee or owned by any subsequent Institutional Holder which has given written notice to the Issuer requesting that the provisions of this SECTION2.5 shall apply, the Issuer will punctually pay when due the principal thereof, interest thereon and Make-Whole Amount, if any, due with respect to said principal, without any presentment thereof, directly to you, to your nominee or to such subsequent Institutional Holder at your address or your nominee's address set forth in Schedule I hereto or such other address as you, your nominee or such subsequent Institutional Holder may from time to time designate in writing to the Issuer or, if a bank account with a United States bank is designated for you or your nominee on Schedule I hereto or in any written notice to the Issuer from you, from your nominee or from any such subsequent Institutional Holder, the Issuer will make such payments in immediately available funds to such bank account, marked for attention as indicated, or in such other manner or to such other account in any United States bank as you, your nominee or any such subsequent Institutional Holder may from time to time direct in writing. SECTION 3 REPRESENTATIONS 3.1. REPRESENTATIONS OF THE GENERAL PARTNER, THE ISSUER AND THE COMPANY. (a) The General Partner and the Issuer represent and warrant that all representations and warranties set forth in Exhibit B-1 are true and correct as of the date hereof and are incorporated herein by reference with the same force and effect as though herein set forth in full. (b) The Company represents and warrants that all representations and warranties set forth in Exhibit B-2 are true and correct as of the date hereof and are incorporated herein by reference with the same force and effect as though herein set forth in full. 3.2. REPRESENTATIONS OF THE PURCHASERS. You represent that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds and not with a view to the distribution thereof, PROVIDED that the disposition of your or their property shall at all times be within your or their control. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Issuer is not required to register the Notes. 3 You represent that at least one of the following statements is an accurate representation as to each source of funds (a "SOURCE") to be used by you to pay the purchase price of the Notes to be purchased by you hereunder: (a) the Source is an "insurance company general account" within the meaning of Department of Labor Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no employee benefit plan, treating as a single plan all plans maintained by the same employer or employee organization, with respect to which the amount of the general account reserves and liabilities for all contracts held by or on behalf of such plan, exceeds ten percent (10%) of the total reserves and liabilities of such general account (exclusive of separate account liabilities) plus surplus, as set forth in the National Association of Insurance Commissioners (the "NAIC") Annual Statement filed with your state of domicile; or (b) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as you have disclosed to the Obligors in writing pursuant to this paragraph (b), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (c) the Source constitutes assets of an "investment fund" (within the meaning of Part V of the QPAM Exemption) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Issuer or the Company and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Issuer and the Company in writing pursuant to this paragraph (c); or (d) the Source is a governmental plan; or (e) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Issuer and the Company in writing pursuant to this paragraph (e); or (f) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. As used in this SECTION3.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective meanings assigned to such terms in Section 3 of ERISA. SECTION 4 CLOSING CONDITIONS 4.1. CONDITIONS. Your obligation to purchase Notes in the amounts set forth opposite your name in Schedule I hereto on the Closing Date shall be subject to the performance by the Issuer and the Company of their respective agreements hereunder which by the terms hereof are to be performed at or prior to the Closing Date and to the following further conditions precedent: (a) ISSUER AND GENERAL PARTNER CLOSING CERTIFICATE. You shall have received a certificate dated the Closing Date, signed by the President or a Vice President of the General Partner on behalf of the Issuer and as an authorized officer of the General Partner, the truth and accuracy of which shall be a condition to your obligation to purchase the Notes proposed to be sold to you and to the effect that (i) the representations and warranties of the Issuer and the General Partner set forth in Exhibit B-1 hereto are true and correct on 4 and with the same effect as if made on the Closing Date, (ii) the Issuer has performed all obligations hereunder which are required to be performed by it on or prior to the Closing Date, and (iii) no Default or Event of Default has occurred and is continuing. (b) COMPANY CLOSING CERTIFICATE. You shall have received a certificate dated the Closing Date, signed by the President or Vice President, Finance and Administration, of the Company, the truth and accuracy of which shall be a condition to your obligation to purchase the Notes proposed to be sold to you and to the effect that (i) the representations and warranties of the Company set forth in Exhibit B-2 hereto are true and correct on and with the same effect as if made on the Closing Date, (ii) the Company has performed all obligations hereunder which are required to be performed by it on or prior to the Closing Date, and (iii) no Default or Event of Default has occurred and is continuing. (c) GUARANTY AGREEMENTS. The Guaranty Agreement (Company) shall have been duly authorized, executed and delivered by the Company and the Guaranty Agreement (IPG (US)) shall have been duly authorized, executed and delivered by IPG (US). (d) LEGAL OPINIONS. You shall have received from Chapman and Cutler, who are acting as your special counsel in this transaction, and from Stikeman, Elliott, Canadian counsel to the Obligors, and from Morgan, Lewis & Bockius LLP, special U.S. counsel to the Obligors and IPG (US), and Richards, Layton and Finger, P.A., special counsel to the Obligors and IPG (US) as to matters of Delaware law, their respective opinions dated the Closing Date, in form and substance satisfactory to you, and covering the matters set forth in Exhibits C, D, E and F respectively, hereto. (e) RELATED TRANSACTIONS. The Issuer shall have consummated the sale of the entire principal amount of the Notes scheduled to be sold on the Closing Date pursuant to this Agreement and the other Agreements referred to in SECTION1.3. (f) OUTSTANDING DEBT. The Company and its Restricted Subsidiaries shall not have any Debt outstanding on the Closing Date other than that specifically described in Annex B to Exhibit B-2 hereto. (g) CONSENT TO RECEIVE SERVICE OF PROCESS. You shall have received, in form and substance satisfactory to you, evidence of the consent of CT Corporation System in New York, New York to the appointment and designation provided for by SECTION9.11 for the period from the Closing Date through June 1, 2009 (and the prepayment in full of all fees in respect thereof). (h) SATISFACTORY PROCEEDINGS. All proceedings taken in connection with the transactions contemplated by this Agreement, and all documents necessary to the consummation thereof, shall be satisfactory in form and substance to you and your special counsel, and you shall have received a copy (executed or certified as may be appropriate) of all legal documents or proceedings taken in connection with the consummation of said transactions. (i) PAYMENT OF SPECIAL COUNSEL FEES. The Company shall have paid all reasonable fees and expenses of Chapman and Cutler, special counsel to the Purchasers, to the extent that such fees and expenses are known as at such Closing Date and are reflected in appropriate bills or invoices delivered by such special counsel. (j) CONSENTS OF HOLDERS OF OTHER INDEBTEDNESS. On or prior to the Closing Date, any notice, consent or approval required to be obtained from any holder or holders of any outstanding Debt of the Company or any Restricted Subsidiary, and any amendments or agreements pursuant to which any Debt may have been issued which shall be necessary to permit the consummation of the transactions contemplated hereby shall have been obtained, and all such notices, consents or amendments shall be satisfactory in form and substance to you and your special counsel. 4.2. WAIVER OF CONDITIONS. If on the Closing Date the Issuer fails to tender to you the Notes to be issued to you on such date or if the conditions specified in SECTION4.1 have not been fulfilled, you may thereupon elect to be relieved of all further obligations under this Agreement. Without limiting the foregoing, if the conditions specified in SECTION4.1 have not been fulfilled, you may waive compliance by the Issuer or the Company, as the case may be, with any such condition to such extent as you may in your sole discretion determine. Nothing in this SECTION4.2 5 shall operate to relieve either Obligor of any of its obligations hereunder or to waive any of your rights against the Obligors. SECTION 5 COMPANY, GENERAL PARTNER AND ISSUER COVENANTS From and after the Closing Date and continuing so long as any amount remains unpaid on any Note: 5.1. CORPORATE OR PARTNERSHIP EXISTENCE, ETC. The Company will preserve and keep in full force and effect, and will cause each Restricted Subsidiary to preserve and keep in full force and effect, its corporate existence and all licenses and permits necessary to the proper conduct of its business; PROVIDED, HOWEVER, that the foregoing shall not prevent any transaction permitted by SECTION5.12. Subject to the provisions of SECTION5.18, (i) the Issuer shall at all times be and remain a Delaware limited partnership; (ii) Intertape Polymer Inc., a Canadian corporation, (or any other Wholly-owned Restricted Subsidiary incorporated under the laws of Canada or any Province thereof or of the United States or any State thereof) shall at all times be and remain the General Partner and (iii) the Company shall at all times own directly or indirectly 100% of the outstanding shares of capital stock of the General Partner, free and clear of Liens. 5.2. INSURANCE. The Company will maintain, and will cause each Restricted Subsidiary to maintain, insurance coverage by financially sound and reputable insurers in such forms and amounts and against such risks as are customary for corporations of established reputation engaged in the same or a similar business and owning and operating similar properties in accordance with good business practice. 5.3. TAXES, CLAIMS FOR LABOR AND MATERIALS, COMPLIANCE WITH LAWS. Without limiting any other obligation of the Company hereunder including, without limitation, pursuant to the second sentence of this SECTION5.3, the Company will promptly pay and discharge, and will cause each Subsidiary promptly to pay and discharge, all lawful taxes, assessments and governmental charges or levies imposed upon the Company or such Subsidiary, respectively, or upon or in respect of all or any part of the property or business of the Company or such Subsidiary, all trade accounts payable in accordance with usual and customary business terms, and all claims for work, labor or materials, which if unpaid might become a Lien upon any property of the Company or a Restricted Subsidiary; PROVIDED, HOWEVER, that the Company or such Subsidiary shall not be required to pay any such tax, assessment, charge, levy, account payable or claim if (i) the validity, applicability or amount thereof is being contested in good faith by appropriate actions or proceedings which will prevent the forfeiture or sale of any property of the Company or such Subsidiary or any material interference with the use thereof by the Company or such Subsidiary, and (ii) the Company or such Subsidiary shall set aside on its books, reserves adequate in accordance with GAAP. The Company will promptly comply and will cause each Subsidiary to comply with all laws, ordinances or governmental rules and regulations to which it is subject including, without limitation, the Occupational Safety and Health Act of 1970, as amended, ERISA and all laws, ordinances, governmental rules and regulations relating to environmental protection in all applicable jurisdictions, the violation of which could materially and adversely affect the properties, business, profits or financial condition of the Company and its Restricted Subsidiaries, taken as a whole, or would result in any Lien not permitted under SECTION5.10. 5.4. MAINTENANCE, ETC. The Company will maintain, preserve and keep, and will cause each Restricted Subsidiary to maintain, preserve and keep, its properties which are used or useful in the conduct of its business (whether owned in fee or a leasehold interest) in good repair and working order and from time to time will make all necessary repairs, replacements, renewals and additions so that at all times the efficiency thereof shall be maintained. 5.5. NATURE OF BUSINESS. The Company and its Restricted Subsidiaries will continue to carry on substantially the same type of business currently carried on and activities which are ancillary, incidental or necessary to the ongoing business of the Company and its Restricted Subsidiaries as presently conducted. 5.6. CONSOLIDATED NET WORTH. The Company will at all times keep and maintain Consolidated Net Worth at an amount not less than U.S. $200,000,000. 6 5.7. FIXED CHARGES COVERAGE RATIO. The Company will keep and maintain the ratio (determined as of the end of each fiscal quarter of the Company) of Net Income Available for Fixed Charges to Fixed Charges for the immediately preceding period of four consecutive fiscal quarters including the fiscal quarter ending on the calculation date (taken as a single accounting period) at not less than 2.0 to 1.0. 5.8. LEVERAGE RATIO. The Company will not at any time permit Consolidated Funded Debt to exceed 55% of Consolidated Total Capitalization. 5.9. ADDITIONAL LIMITATIONS ON DEBT. (a) In addition to and not in limitation of any other restrictions hereunder, the Company will not, and will not permit any Restricted Subsidiary to, create, assume or incur or in any manner become liable (including, without limitation, by merger, consolidation or amalgamation) in respect of any Priority Debt unless at the time of issuance of any such Priority Debt and after giving effect thereto and the application of the proceeds therefrom, the aggregate principal amount of Priority Debt shall not exceed an amount equal to 20% of Consolidated Net Worth, PROVIDED, HOWEVER, that if and so long as IPG (US) is a Restricted Subsidiary, "PRIORITY DEBT" shall not include any unsecured debt ("UNSECURED DEBT") incurred by IPG (US) so long as (i) such unsecured Debt ranks PARI PASSU with the Notes as guaranteed by the Guaranty Agreement (IPG (US)); and (ii) the lenders of such other unsecured Debt shall enter into agreements with respect to the claims of the holders of the Notes under the Guaranty Agreement (IPG (US)) being on a PARI PASSU basis with such unsecured Debt, which agreement shall be delivered concurrently with each issuance of such unsecured Debt and shall contain provisions comparable to those contained in the Creditor Agreement being supplemented and delivered in the date of Closing. (b) Any corporation which becomes a Restricted Subsidiary after the date hereof shall for all purposes of this SECTION5.9 be deemed to have created, assumed or incurred at the time it becomes a Restricted Subsidiary all Debt of such corporation existing immediately after it becomes a Restricted Subsidiary. 5.10. LIMITATION ON LIENS. The Company will not, and will not permit any Restricted Subsidiary to, create or incur, or suffer to be incurred or to exist, any Lien on its or their property or assets, whether now owned or hereafter acquired, or upon any income or profits therefrom, or transfer any property for the purpose of subjecting the same to the payment of obligations in priority to the payment of its or their general creditors, or acquire or agree to acquire, or permit any Restricted Subsidiary to acquire, any property or assets upon conditional sales agreements or other title retention devices, except: (a) Liens for property taxes and assessments or governmental charges or levies and Liens securing claims or demands of mechanics and materialmen, PROVIDED payment thereof is not at the time required by SECTION5.3; (b) Liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Company or a Restricted Subsidiary shall at any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have been secured; (c) Liens incidental to the conduct of business or the ownership of properties and assets (including Liens in connection with worker's compensation, unemployment insurance and other like laws, warehousemen's and attorneys' liens and statutory landlords' liens) and Liens to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other Liens of like general nature incurred in the ordinary course of business and not in connection with the borrowing of money; PROVIDED in each case, the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings; (d) minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which are necessary for the conduct of the activities of the Company and its Restricted Subsidiaries or which customarily exist on properties of corporations engaged in similar activities and similarly situated and which do not in any event materially impair their use in the operation of the business of the Company and its Restricted Subsidiaries; 7 (e) Liens securing liabilities of a Restricted Subsidiary to the Company or to another Wholly-owned Restricted Subsidiary; (f) Liens on shares of stock of Unrestricted Subsidiaries; (g) Liens existing as of March 31, 1999 and reflected in Annex B to Exhibit B-2 to the Note Agreements; (h) Liens incurred after the Closing Date given to secure the payment of the purchase price incurred in connection with (and within twelve months of) the acquisition after the Closing Date of fixed assets useful and intended to be used in carrying on the business of the Company or a Restricted Subsidiary, including Liens existing on such fixed assets at the time of acquisition thereof or at the time of acquisition by the Company or a Restricted Subsidiary of any business entity then owning such fixed assets, whether or not such existing Liens were given to secure the payment of the purchase price of the fixed assets to which they attach so long as they were not incurred, extended or renewed in contemplation of such acquisition, PROVIDED that (i) the Lien shall attach solely to the fixed assets acquired or purchased, (ii) at the time of acquisition of such fixed assets, the aggregate amount remaining unpaid on all liabilities secured by Liens on such fixed assets whether or not assumed by the Company or a Restricted Subsidiary shall not exceed an amount equal to the lesser of the total purchase price or fair market value at the time of acquisition of such fixed assets (as determined in good faith by the Board of Directors of the Company), and (iii) all Debt secured by such Liens shall have been incurred within the other applicable limitations of SECTION5.8 and, in the case of a Restricted Subsidiary (other than the Issuer), SECTION5.9; (i) Liens incurred in connection with any renewals, extensions or refundings of any Debt secured by Liens described in SECTIONSECTION5.10(g) and (h), PROVIDED that no additional property is encumbered and there is no increase in the aggregate principal amount of Debt secured thereby; and (j) Liens, in addition to those permitted by SECTIONSECTION5.10(a) through (i) above, securing Debt of the Company or any Restricted Subsidiary; PROVIDED that after giving effect to the incurrence of all Debt secured by such Liens the aggregate principal amount of Priority Debt shall not exceed an amount equal to 20% of Consolidated Net Worth. 5.11. RESTRICTED PAYMENTS. The Company will not, and will not permit any Restricted Subsidiary to, make any Restricted Investment or Restricted Payment, if, after giving effect thereto, the sum of (i) the aggregate amount of Restricted Payments made during the period from and after January 1, 1999 to and including the date of the making of the Restricted Payment in question, plus (ii) the aggregate amount of all Restricted Investments made by the Company or any Restricted Subsidiary during said period would exceed the sum of (x) U.S. $100,000,000 plus (y) 75% of Consolidated Net Income for such period, computed on a cumulative basis for said entire period (or if such Consolidated Net Income is a deficit figure for any fiscal period within such period, then minus 100% of such deficit) plus (z) an amount equal to the aggregate net cash proceeds received by the Company from the issuance or sale after January 1, 1998 (other than to the Company or any Subsidiary) of shares of common stock of the Company. In addition to the foregoing restrictions, the Company will not make any Restricted Payment or any Restricted Investment if, at the time thereof or after giving effect thereto, any Default or Event of Default shall exist. The Company will not declare any dividend which constitutes a Restricted Payment payable more than 60 days after the date of declaration thereof. For the purposes of this SECTION5.11, the amount of any Restricted Payment declared, paid or distributed in property shall be deemed to be the greater of the book value or fair market value (as determined in good faith by the Board of Directors of the Company) of such property at the time of the making of the Restricted Payment in question. In valuing any Restricted Investments for the purpose of applying the limitations set forth in this SECTION5.11, such Restricted Investments shall be taken at the original cost thereof, without allowance for any subsequent write-offs or appreciation or depreciation therein, but less any amount repaid or recovered on account of capital or principal. 8 For purposes of this SECTION5.11, at any time when a corporation becomes a Restricted Subsidiary, all Restricted Investments of such corporation at such time shall be deemed to have been made by such corporation, as a Restricted Subsidiary, at such time. 5.12. MERGERS, CONSOLIDATIONS AND SALES OF ASSETS. (a) The Company will not, and will not permit any Restricted Subsidiary to, (i) consolidate or amalgamate with or be a party to a merger with any other corporation or (ii) sell, lease or otherwise dispose of all or any substantial part (as defined in paragraph (d) of this SECTION5.12) of Consolidated Assets; PROVIDED, HOWEVER, that: (1) any Restricted Subsidiary may merge or amalgamate or consolidate with or into the Company or any Wholly-owned Restricted Subsidiary so long as (i) in any such transaction involving the Issuer and a Wholly-owned Restricted Subsidiary (and not involving the Company), the Issuer shall be the surviving or continuing limited partnership or corporation and (ii) in any such transaction involving the Company, the Company shall be the surviving or continuing entity, or (iii) in any other such transaction involving the Issuer and not the Company, the surviving or continuing corporation or limited partnership shall be the Issuer or if the surviving or continuing corporation or limited partnership is not the Issuer, then such successor entity (x) shall have executed and delivered to each holder of the Notes its assumption of the due and punctual performance of each covenant and condition of the Note Agreements and the Notes (pursuant to such agreements and instruments as shall be reasonably satisfactory to the holders of the Notes), and shall have caused to be delivered to each holder of the Notes an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to such holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof, and (y) shall be a solvent limited partnership or corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia, Canada or any province thereof, and, at the time of any such amalgamation, consolidation or merger described in this SECTION5.12(a), and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing; (2) the Company may consolidate or amalgamate or merge with any other corporation if, at the time of any such amalgamation, consolidation or merger described in this SECTION5.12(a) and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing, and (i) the surviving or continuing corporation shall be the Company, or (ii) the successor entity is not the Company, then such successor entity (x) shall have executed and delivered to each holder of the Notes its assumption of the due and punctual performance of each covenant and condition of the Note Agreements and the Guaranty Agreement (Company) (pursuant to such agreements and instruments as shall be reasonably satisfactory to the holders of the Notes), and the successor entity shall have caused to be delivered to each holder of the Notes an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to such holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof, and (y) shall be a solvent corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia or under the laws of Canada or any province thereof; and (3) any Restricted Subsidiary (including the Issuer) may sell, lease or otherwise dispose of all or any substantial part of its assets to the Company and any Restricted Subsidiary (except the Issuer) may sell, lease or otherwise dispose of all or any substantial part of its assets to any Wholly-owned Restricted Subsidiary (including the Issuer). (b) The Company will not permit any Restricted Subsidiary to issue or sell any shares of stock of any class (including as "stock" for the purposes of this SECTION5.12, any warrants, rights or options to purchase or otherwise acquire stock or other Securities exchangeable for or convertible into stock) of such Restricted Subsidiary to any Person other than the Company or a Wholly-owned Restricted Subsidiary, except for the purpose of qualifying directors, or (in the case of a Restricted Subsidiary other than the 9 Issuer) except in satisfaction of the validly pre-existing preemptive rights of minority shareholders in connection with the simultaneous issuance of stock to the Company and/or a Restricted Subsidiary whereby the Company and/or such Restricted Subsidiary maintain their same proportionate interest in such Restricted Subsidiary. (c) The Company will not sell, transfer or otherwise dispose of any shares of stock of any Restricted Subsidiary (except to qualify directors) and will not permit any Restricted Subsidiary to sell, transfer or otherwise dispose of (except any Restricted Subsidiary may make such sale, transfer or disposition to the Company and any Restricted Subsidiary (other than the Issuer) may make such sale, transfer or disposition to a Wholly-owned Restricted Subsidiary) any shares of stock of any other Restricted Subsidiary, unless: (1) simultaneously with such sale, transfer, or disposition, all shares of stock of such Restricted Subsidiary at the time owned by the Company and by every other Restricted Subsidiary shall be sold, transferred or disposed of as an entirety; and (2) such sale or other disposition does not involve a substantial part (as hereinafter defined) of the assets of the Company and its Restricted Subsidiaries. The provisions of this SECTION5.12(c) shall not prohibit a transaction otherwise permitted by clause (ii) of the second sentence of SECTION5.1 or by SECTION5.18. (d) As used in this SECTION5.12, a sale, lease or other disposition of assets (a "TRANSFER") shall be deemed to be a "SUBSTANTIAL PART" of the assets of the Company and its Restricted Subsidiaries if the book value of such assets, when added to the book value of all other assets Transferred by the Company and its Restricted Subsidiaries (other than in the ordinary course of business) during the 12-month period ending with the date of such Transfer, exceeds 10% of Consolidated Assets, determined as of the end of the immediately preceding fiscal quarter. For the purpose of making any determination of "substantial part," any Transfer shall not be included (i) if and to the extent the net proceeds thereof are segregated from the general accounts of the Company and any Restricted Subsidiary, invested in Cash Equivalents until applied in accordance with clause (x) or (y) below, and within one year after such Transfer are used either (x) to acquire Like Assets, or (y) to prepay Senior Funded Debt, (ii) if the assets Transferred are acquired subsequent to the Closing Date, do not constitute Like Assets and are sold for the fair market value thereof, or (iii) if the assets Transferred are exchanged for Like Assets having a fair market value at least equal to that of the assets being Transferred. Any such prepayment pursuant to clause (i)(y) above applied to the prepayment of the Notes shall be made pursuant to SECTION2.2 hereof. 5.13. REPURCHASE OF NOTES. None of the Company, the Issuer, any Subsidiary or any Affiliate, directly or indirectly, may repurchase or make any offer to repurchase any Notes unless an offer has been made to repurchase Notes, pro rata, from all holders of the Notes at the same time and upon the same terms. Notes repurchased by the Company or any Subsidiary or Affiliate shall be cancelled. 5.14. TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any Restricted Subsidiary to, enter into or be a party to any transaction or arrangement with any Affiliate (including, without limitation, the purchase from, sale to or exchange of property with, or the rendering of any service by or for, any Affiliate), except in the ordinary course of and pursuant to the reasonable requirements of the Company's or such Restricted Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than would obtain in a comparable arm's-length transaction with a Person other than an Affiliate. 5.15. TERMINATION OF PENSION PLANS. (a) The Company will not and will not permit any Subsidiary to withdraw from any Multiemployer Plan or permit any employee benefit plan maintained by it to be terminated if such withdrawal or termination could result in withdrawal liability (as described in Part 1 of Subtitle E of Title IV of ERISA) or the imposition of a Lien on any property of the Company or any Subsidiary pursuant to Section 4068 of ERISA. (b) The Company will and will cause each Subsidiary to maintain each Foreign Pension Plan in accordance with the terms and provisions thereof and the requirements of applicable laws, rules and regulations 10 except to the extent the failure to so maintain any such Foreign Pension Plans could not reasonably be expected to materially adversely affect the Company, the Issuer or the Company and its Restricted Subsidiaries taken as a whole or the performance by the Company or the Issuer of this Agreement, the Notes or the Guaranty Agreement (Company). 5.16. DESIGNATION OF RESTRICTED SUBSIDIARIES. The Company may designate any Subsidiary a Restricted Subsidiary by giving written notice to each holder of Notes that the Board of Directors of the Company has made such designation, PROVIDED, HOWEVER, no Subsidiary may be designated a Restricted Subsidiary unless, at the time of such designation and after giving effect thereto, no Default or Event of Default shall exist. Such designation may be revoked by the Board of Directors of the Company; PROVIDED, HOWEVER, that no Unrestricted Subsidiary may be designated as a Restricted Subsidiary and no Restricted Subsidiary may be designated as an Unrestricted Subsidiary unless, at the time of such action and after giving effect thereto, no Default or Event of Default would exist and at least $1.00 of additional Priority Debt could be incurred under SECTION5.9, and PROVIDED, FURTHER, no Unrestricted Subsidiary shall at any time be designated a Restricted Subsidiary if such Unrestricted Subsidiary shall previously have been designated a Restricted Subsidiary, and no Restricted Subsidiary shall at any time be designated an Unrestricted Subsidiary if such Restricted Subsidiary shall previously have been designated as an Unrestricted Subsidiary pursuant to this SECTION5.16. The foregoing provisions notwithstanding, the Issuer and IPG (US) shall at all times be and remain a Wholly-owned Restricted Subsidiary. 5.17. REPORTS AND RIGHTS OF INSPECTION. The Company will keep, and will cause each Restricted Subsidiary to keep, proper books of record and account in which full and correct entries will be made of all dealings or transactions of, or in relation to, the business and affairs of the Company or such Restricted Subsidiary, in accordance with GAAP consistently applied (except for changes disclosed in the financial statements furnished to you pursuant to this SECTION5.17 and concurred in by the independent public accountants referred to in SECTION5.17(b) hereof), and will furnish to you so long as you are the holder of any Note and to each other holder of the then outstanding Notes (in duplicate if so specified below or otherwise requested): (a) QUARTERLY STATEMENTS. As soon as available and in any event within 75 days after the end of each quarterly fiscal period (except the last) of each fiscal year, copies of: (1) consolidated balance sheets of the Company and its consolidated Subsidiaries (and, if different, of the Restricted Group) as of the close of such quarterly fiscal period, setting forth in comparative form the consolidated figures for the corresponding period of the fiscal year then most recently ended, (2) consolidated statements of earnings and retained earnings of the Company and its consolidated Subsidiaries (and, if different, of the Restricted Group) for such quarterly fiscal period and for the portion of the fiscal year ending with such quarterly fiscal period, in each case setting forth in comparative form the consolidated figures for the corresponding periods of the preceding fiscal year, and (3) consolidated statements of changes in cash resources of the Company and its consolidated Subsidiaries (and, if different, of the Restricted Group) for the portion of the fiscal year ending with such quarterly fiscal period, setting forth in comparative form the consolidated figures for the corresponding period of the preceding fiscal year, all in reasonable detail and certified as complete and correct by an authorized financial officer of the Company; (b) ANNUAL STATEMENTS. As soon as available and in any event within 120 days after the close of each fiscal year of the Company, copies of: (1) consolidated and consolidating balance sheets of the Company and its consolidated Subsidiaries (and, if different, of the Restricted Group) as of the close of such fiscal year, and (2) consolidated and consolidating statements of earnings and retained earnings and changes in cash resources of the Company and its consolidated Subsidiaries (and, if different, of the Restricted Group) for such fiscal year, in each case setting forth in comparative form the consolidated and consolidating figures for the preceding fiscal year, all in reasonable detail and with regard to the consolidated figures, accompanied by a report thereon of Raymond Chabot Grant Thorton or any 11 other firm of independent public accountants of recognized national standing in the United States or Canada selected by the Company to the effect that the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company and its consolidated Subsidiaries (and, if different, of the Restricted Group) as of the end of the fiscal year being reported on and the consolidated results of the operations and changes in cash resources for said year in conformity with GAAP and that the examination of such accountants in connection with such financial statements has been conducted in accordance with generally accepted auditing standards and included such tests of the accounting records and such other auditing procedures as said accountants deemed necessary in the circumstances; (c) AUDIT REPORTS. Promptly upon receipt thereof, one copy of each interim or special audit made by independent accountants of the books of the Company or any Restricted Subsidiary; (d) GOVERNMENTAL AND OTHER REPORTS. Promptly upon their becoming available, one copy of each financial statement, report, notice or proxy statement sent by the Company to stockholders generally and of each regular or periodic report, and any registration statement or prospectus filed by the Company or any Subsidiary with any securities exchange or any governmental regulatory body including, but without limitation, the Company's Form 20F and unaudited quarterly reports, and copies of any orders in any proceedings to which the Company or any of its Subsidiaries is a party, issued by any governmental agency having jurisdiction over the Company or any of its Subsidiaries; (e) ERISA REPORTS. Promptly upon the occurrence thereof, written notice of (i) a Reportable Event with respect to any Plan; (ii) the institution of any steps by the Company, any ERISA Affiliate, the PBGC or any other person to terminate any Plan; (iii) the institution of any steps by the Company or any ERISA Affiliate to withdraw from any Plan; (iv) a non-exempt "prohibited transaction" within the meaning of Section 406 of ERISA in connection with any Plan; (v) any material increase in the contingent liability of the Company or any Subsidiary with respect to any post-retirement welfare liability; (vi) the taking of any action by, or the threatening of the taking of any action by, the Internal Revenue Service, the Department of Labor or the PBGC with respect to any of the foregoing; or (vii) any event or circumstance with respect to any Foreign Pension Plan which could reasonably be expected to materially adversely affect the Company, the Issuer or the Company and its Restricted Subsidiaries on a consolidated basis or the performance by the Company or the Issuer hereunder or under the Notes or the Guaranty Agreement (Company); (f) OFFICER'S CERTIFICATES. Within the periods provided in paragraphs (a) and (b) above, a certificate of an authorized financial officer of the Company stating that such officer has reviewed the provisions of this Agreement and setting forth: (i) the information and computations (in sufficient detail) required in order to establish whether the Company was in compliance with the requirements of SECTION5.6 through SECTION5.12 at the end of the period covered by the financial statements then being furnished, (ii) whether there existed as of the date of such financial statements and whether, to the best of such officer's knowledge, there exists on the date of the certificate or existed at any time during the period covered by such financial statements any Default or Event of Default (including, without limitation, with respect to SECTION5.2) and, if any such condition or event exists on the date of the certificate, specifying the nature and period of existence thereof and the action the Company is taking and proposes to take with respect thereto and (iii) any material differences between United States generally accepted accounting principles and GAAP to the extent reasonably relevant to determining compliance with the requirements of SECTION5.6 through SECTION5.12 hereof; (g) ACCOUNTANT'S CERTIFICATES. Within the period provided in paragraph (b) above, a certificate of the accountants who render an opinion with respect to such financial statements, stating that as of the date of the fiscal year end, and for that year, with respect to which such accountants have given their report pursuant to SECTION5.17(b), the Company was in compliance with the provisions of SECTIONSECTION5.6, 5.7 and 5.8 and that, in the normal course of their audit (without special or additional investigation), they have not become aware of a Default or Event of Default under the provisions of SECTIONSECTION5.9, 5.10(j), 5.11 or 5.12 (but only to the extent relative to the sale of a substantial part of the assets thereunder); (h) UNRESTRICTED SUBSIDIARIES. Within the respective periods provided in paragraphs (a) and (b) above, financial statements of the character and for the dates and periods as in said paragraphs (a) and 12 (b) provided covering each Unrestricted Subsidiary (or groups of Unrestricted Subsidiaries on a consolidated basis); and (i) REQUESTED INFORMATION. With reasonable promptness, such other data and information as you or any such holder may reasonably request. Without limiting the foregoing, the Company will permit you, so long as you are the holder of any Note, and each holder of the then outstanding Notes (or such Persons as either you or such holder may designate), to visit and inspect, under the Company's guidance, any of the properties of the Company or any Restricted Subsidiary, to examine all of their books of account, records, reports and other papers, to make copies and extracts therefrom and to discuss their respective affairs, finances and accounts with their respective officers, employees, and independent public accountants (and by this provision the Company authorizes said accountants to discuss with you the finances and affairs of the Company and its Restricted Subsidiaries) all at such reasonable times and as often as may be reasonably requested. The Company shall not be required to pay or reimburse any Noteholder for reasonable expenses which such Noteholder may incur in connection with any such visitation or inspection, except that if such visitation or inspection is made during any period when a Default or an Event of Default shall have occurred and be continuing, the Company agrees to reimburse such Noteholder for all such expenses promptly upon demand. You agree that you will use all reasonable efforts to keep confidential any information from time to time supplied to you by or on behalf of the Company (including, without limitation, any such information provided pursuant to this SECTION5.17) which the Company or any Person acting on its behalf designates in writing at the time of its delivery to you, or as promptly as practicable thereafter, is to be treated as confidential, PROVIDED, HOWEVER, that the foregoing provisions of this paragraph shall not apply: (i) to any information already known to you at the time of its receipt thereof (other than any such information which to your knowledge is already known to you by virtue of any breach by any third party of any confidentiality obligation owed to the Company); (ii) to any information which is or becomes public knowledge otherwise than (to your knowledge) by reason of any breach of this paragraph; (iii) to the extent that you are required to disclose the information in question pursuant to any law, statute, rule or regulation or any order of any court or judicial process or pursuant to any direction, request or requirement (whether or not having the force of law but, if not having the force of law, being of a type with which Institutional Holders in the relevant jurisdiction are accustomed to comply) of any self-regulating organization or any governmental, fiscal, monetary or other authority; (iv) to the disclosure of any such information to any regulators or auditors including the National Association of Insurance Commissioners or any successor agency; (v) to the disclosure of any such information to any other holder of a Note; 13 (vi) to the disclosure of any information to your counsel or accountants or those of any other holder of a Note; (vii) to the disclosure of any information to any of your employees, other professional advisors or those of any other holder of a Note; (viii) to the disclosure of any information to Moody's Investors Service, Inc., Standard & Poor's Corporation or any other nationally recognized rating agency; (ix) to the extent that you need to disclose the information in question for the protection or enforcement of any of your rights or interests against the Issuer or the Company, whether under the Note Agreements or otherwise; or (x) to the prospective transferee in connection with any contemplated transfer of any of the Notes (or of any other security of the Company owned by you or any Person advised by your investment advisor or any of its subsidiaries) by you PROVIDED, that such prospective transferee shall agree (in writing) to be bound by the confidentiality provisions of this SECTION5.17 as if it were a holder of Notes hereunder. 5.18. SUBSTITUTION OF ISSUER. The Issuer shall have the right to require all (and not less than all) of the holders to deliver the outstanding Notes held by each holder to the Issuer in exchange for substantially identical senior guaranteed promissory notes (the "NEW NOTES") of another Restricted Subsidiary (the "NEW ISSUER") subject to the satisfaction of each of the following conditions: (a) the Issuer shall have provided at least 30 days' prior written notice of the exchange (the date of the exchange being referred to as the "EXCHANGE DATE") to the holders of the proposed delivery to the holders of existing Notes describing such exchange and making reference to this SECTION5.18; (b) the New Notes shall be in the form of Exhibit A hereto and dated as of the last date on which accrued interest was paid in full or, if accrued interest was never paid in full, as of the Closing Date; (c) the holders, concurrently with the issuance of the New Notes on the Exchange Date shall have received such corporate showings, legal opinions and other closing items as may be reasonably requested by the holders (including, without limitation thereof, such amendments, modifications and ratifications with respect to the Guaranty Agreement (Company) and the Guaranty Agreement (IPG (US)) as the holders might reasonably request), all reasonably satisfactory to the holders in form, scope and substance; (d) the New Issuer shall be a corporation, partnership, or limited liability company organized under the laws of Canada or the United States or any State or Province thereof and no holder shall have determined, in its reasonable judgment (by written notice to the Issuer at least 10 days prior to the Exchange Date), that the exchange contemplated hereinabove will have a material adverse tax effect or other material adverse effect on the holder; and (e) at the time of such exchange and after giving effect thereto, no Default or Event of Default shall exist hereunder. The Company shall pay all reasonable costs and expenses incurred by the holders in connection with any exchange effected pursuant to this SECTION5.18. In the event each of the foregoing conditions shall have been satisfied in full, from and after the Exchange Date all references to the Issuer shall be deemed to refer to the New Issuer referred to hereinabove without the necessity of additional amendment or modification to this Agreement or the Notes. 14 SECTION 6 EVENTS OF DEFAULT AND REMEDIES THEREFOR 6.1. EVENTS OF DEFAULT. Any one or more of the following shall constitute an "EVENT OF DEFAULT" as such term is used herein: (a) Default shall occur in the payment of interest on any Note when the same shall have become due and such default shall continue for more than five Business Days; or (b) Default shall occur in the making of any payment of the principal of any Note or premium, if any, thereon at the expressed or any accelerated maturity date or at any date fixed for prepayment; or (c) Default shall be made in the payment when due (whether by lapse of time, by declaration, by call for redemption or otherwise) of the principal of or interest on any Material Debt (other than the Notes) of the Company or any Restricted Subsidiary and such default shall not have been waived and shall continue beyond the period of grace, if any, allowed under the terms of such Material Debt; or (d) Default or the happening of any event shall occur under any indenture, agreement or other instrument under which any Material Debt of the Company or any Restricted Subsidiary may be issued and such default or event shall continue for a period of time sufficient to permit the acceleration of the maturity of any Material Debt of the Company or any Restricted Subsidiary outstanding thereunder; or (e) Default shall occur in the observance or performance of any covenant or agreement contained in SECTION5.6 through SECTION5.12 hereof or any covenant or agreement contained in the Guaranty Agreement (Company) or any covenant or agreement in the Guaranty Agreement (IPG (US)); or (f) Default shall occur in the observance or performance of any other provision of this Agreement which is not remedied within 30 days after the earlier of (i) the day on which a Responsible Officer of either Obligor, as the case may be, first obtains knowledge of such default, or (ii) the day on which written notice thereof is given to either Obligor by the holder of any Note; or (g) Any representation or warranty made by either Obligor or the General Partner herein, or made by the Company in the Guaranty Agreement (Company) or made by IPG (US) in the Guaranty Agreement (IPG (US)) or made by either Obligor or the General Partner in any statement or certificate furnished by such Obligor or such General Partner in connection with the consummation of the issuance and delivery of the Notes or furnished by either Obligor or the General Partner pursuant hereto, is untrue in any material respect as of the date of the issuance or making thereof; or (h) Final judgment or final judgments for the payment of money aggregating in excess of U.S. $5,000,000 (or the equivalent thereof in any other currency) (exclusive of judgment amounts which are covered by insurance of solvent insurers which have acknowledged such coverage) is or are outstanding against either Obligor or any Restricted Subsidiary or against any property or assets of any such entity and any one of such judgments has remained unpaid, unvacated, unbonded or unstayed by appeal or for a period of 90 days from the date of its entry; or (i) A custodian, liquidator, trustee or receiver is appointed for either Obligor or any Restricted Subsidiary or for the major part of the property of any one of them and is not discharged within 90 days after such appointment; or (j) Either Obligor or any Restricted Subsidiary becomes insolvent or bankrupt, is generally not paying its debts as they become due or makes an assignment for the benefit of creditors, or either Obligor or any Restricted Subsidiary applies for or consents to the appointment of a custodian, liquidator, trustee or receiver for such Obligor or such Restricted Subsidiary or for the major part of the property of any such entity; or (k) Bankruptcy, reorganization, arrangement or insolvency proceedings, or other proceedings for relief under any bankruptcy or similar law or laws for the relief of debtors, are instituted by or against either Obligor or any Restricted Subsidiary and, if instituted against such Obligor or any Restricted Subsidiary, are consented to or are not dismissed within 90 days after such institution; or 15 (l) (i) The Guaranty Agreement (Company) shall be held by a court of competent jurisdiction to be invalid or unenforceable in any respect, or the Company takes any action for the purpose of repudiating or rescinding the Guaranty Agreement (Company) or its obligations thereunder, or the Company declares that its obligations thereunder are unenforceable, or (ii) the Guaranty Agreement (IPG (US)) shall be held by a court of competent jurisdiction to be invalid or unenforceable in any respect, or IPG (US) takes any action for the purpose of repudiating or rescinding the Guaranty Agreement (IPG (US)) or its obligations thereunder, or IPG (US) declares that its obligations thereunder are unenforceable. 6.2. NOTICE TO HOLDERS. When any Event of Default described in the foregoing SECTION6.1 has occurred, or if the holder of any Note or of any other evidence of Debt of either Obligor gives any notice or takes any other action with respect to a claimed default, such Obligor agrees to give notice within three Business Days of such event to all holders of the Notes then outstanding. 6.3. ACCELERATION OF MATURITIES. When any Event of Default described in paragraph (a) or (b) of SECTION6.1 has happened and is continuing, any holder of any Note may, by notice in writing sent in the manner provided in SECTION9.6 to the Company declare the entire principal of and all interest accrued on such Note to be, and such Note shall thereupon become, forthwith due and payable, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived. When any Event of Default described in paragraph (c), (d), (e), (f), (g), (h) or (l) of said SECTION6.1 has happened and is continuing, the holder or holders of 51% or more of the principal amount of Notes of all Series, taken as a single class, at the time outstanding may, by notice to the Company, declare the entire principal and all interest accrued on all Notes to be, and all Notes shall thereupon become, forthwith due and payable, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived. When any Event of Default described in paragraph (i), (j) or (k) of SECTION6.1 has occurred, then all outstanding Notes shall immediately become due and payable without presentment, demand or notice of any kind. Upon the Notes becoming due and payable as a result of any Event of Default as aforesaid, the Issuer will forthwith pay to the holders of the Notes the entire principal and interest accrued on the Notes and, to the extent not prohibited by applicable law, an amount as liquidated damages for the loss of the bargain evidenced hereby (and not as a penalty) equal to the Make-Whole Amount. No course of dealing on the part of the holder or holders of any Notes nor any delay or failure on the part of any holder of Notes to exercise any right shall operate as a waiver of such right or otherwise prejudice such holder's rights, powers and remedies. The Issuer further agrees, to the extent permitted by law, to pay to the holder or holders of the Notes all reasonable costs and expenses incurred by them in the collection of any amounts payable under the Notes upon any Event of Default hereunder or thereon, including reasonable compensation to such holder's or holders' attorneys for all services rendered in connection therewith. All amounts paid hereunder with respect to principal, Make-Whole Amount, if any, and interest on the Notes shall be paid ratably to all Noteholders. 6.4. RESCISSION OF ACCELERATION. The provisions of SECTION6.3 are subject to the condition that if the principal of and accrued interest on all or any outstanding Notes have been declared immediately due and payable by reason of the occurrence of any Event of Default described in paragraph (a), (b), (c), (d), (e), (f), (g), (h) or (l) of SECTION6.1, the holders of at least 66 2/3% in aggregate principal amount of the Notes of all Series, taken as a single class, then outstanding may, by written instrument filed with the Obligors, rescind and annul such declaration and the consequences thereof, PROVIDED that at the time such declaration is annulled and rescinded: (a) no judgment or decree has been entered for the payment of any monies due pursuant to the Notes or this Agreement; (b) all arrears of interest upon all the Notes and all other sums payable under the Notes and under this Agreement (except any principal, interest or premium on the Notes which has become due and payable solely by reason of such declaration under SECTION6.3) shall have been duly paid; and (c) each and every other Default and Event of Default shall have been made good, cured or waived pursuant to SECTION7.1; and PROVIDED FURTHER, that no such rescission and annulment shall extend to or affect any subsequent Default or Event of Default or impair any right consequent thereto. Such annulment and rescission shall be by written instrument filed with the Company. 16 SECTION 7 AMENDMENTS, WAIVERS AND CONSENTS 7.1. CONSENT REQUIRED. Any term, covenant, agreement or condition of this Agreement may, with the consent of the Obligors, be amended or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), if the Obligors shall have obtained the consent in writing of the holders of at least 66 2/3% in aggregate principal amount of outstanding Notes of all Series, taken as a single class; PROVIDED that without the written consent of the holders of all of the Notes then outstanding, no such amendment or waiver shall be effective (i) which will change the time of payment of the principal of or the interest on any Note or change the principal amount thereof or change the rate of interest thereon, or (ii) which will change any of the provisions with respect to optional prepayments including, without limitation, the definition of Make-Whole Amount, or (iii) which will change the percentage of holders of the Notes required to consent to any such amendment or waiver of any of the provisions of this SECTION7 or SECTION6. 7.2. SOLICITATION OF HOLDERS. So long as there are any Notes outstanding, no Obligor will solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement or the Notes unless each holder of Notes (irrespective of the amount of Notes then owned by it) shall be informed thereof by such Obligor and shall be afforded the opportunity of considering the same and shall be supplied by the Obligors with sufficient information to enable it to make an informed decision with respect thereto. No Obligor will directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any holder of Notes as consideration for or as an inducement to entering into by any holder of Notes of any waiver or amendment of any of the terms and provisions of this Agreement or the Notes unless such remuneration is concurrently offered, on the same terms, ratably to the holders of all Notes then outstanding. 7.3. EFFECT OF AMENDMENT OR WAIVER. Any such amendment or waiver shall apply equally to all of the holders of the Notes and shall be binding upon them, upon each future holder of any Note and upon the Obligors, whether or not such Note shall have been marked to indicate such amendment or waiver. No such amendment or waiver shall extend to or affect any obligation not expressly amended or waived or impair any right consequent thereon. SECTION 8 INTERPRETATION OF AGREEMENT; DEFINITIONS 8.1. DEFINITIONS. Unless the context otherwise requires, the terms hereinafter set forth when used herein shall have the following meanings and the following definitions shall be equally applicable to both the singular and plural forms of any of the terms herein defined: "AFFILIATE" shall mean any Person (other than the Company or a Special Restricted Subsidiary) (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, either Obligor, (ii) which beneficially owns or holds 5% or more of any class of the Voting Stock of either Obligor or (iii) 5% or more of the Voting Stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) of which is beneficially owned or held by either Obligor or a Subsidiary. The term "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of Voting Stock, by contract or otherwise. "AMERICAN" shall mean American Tape Co., a Delaware corporation, and any Person who succeeds to all, or substantially all, of the assets and business of American Tape Co. "ANCHOR" shall mean Anchor Continental Inc., a Delaware corporation, and any Person who succeeds to all, or substantially all, of the assets and business of Anchor Continental Inc. "BUSINESS DAY" shall mean any day except a Saturday, Sunday or other day on which banks are generally not open for business in New York, New York or Montreal, Quebec, Canada. "CAPITALIZED LEASE" shall mean any lease (i) the obligation for Rentals with respect to which is required to be capitalized on a consolidated balance sheet of the lessee and its subsidiaries in accordance with GAAP or 17 (ii) for which the amount of the asset and liability thereunder as if so capitalized should be disclosed in a note to such balance sheet. "CAPITALIZED RENTALS" of any Person shall mean as of the date of any determination thereof the amount at which the aggregate Rentals due and to become due under all Capitalized Leases under which such Person is a lessee would be reflected as a liability on a consolidated balance sheet of such Person. "CASH EQUIVALENTS" shall mean, as of the date of any determination thereof, Investments of the type described in clauses (b), (c) or (d) of the definition of the term "Restricted Investments." "CDN." shall mean Canadian dollars. "CLOSING DATE" shall have the meaning ascribed to such term in SECTION1.2. "CODE" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder from time to time. "COMPANY" shall mean Intertape Polymer Group Inc., a corporation incorporated under the laws of Canada, and any Person who succeeds to all, or substantially all, of the assets and business of Intertape Polymer Group Inc. "CONSOLIDATED" when used as a prefix to any item (unless such item is defined differently herein) shall mean the aggregate amount of such item of the Company and its Restricted Subsidiaries on a consolidated basis eliminating intercompany items in accordance with GAAP. "CONSOLIDATED ASSETS" shall mean, as of the date of any determination thereof, consolidated total assets of the Company and its Restricted Subsidiaries determined in accordance with GAAP (excluding, in any event, assets or equity attributable to Unrestricted Subsidiaries). "CONSOLIDATED CURRENT LIABILITIES" shall mean as of the date of any determination thereof such liabilities of the Company and its Restricted Subsidiaries on a consolidated basis as shall be determined in accordance with GAAP to constitute current liabilities (excluding, in any event, liabilities attributable to Unrestricted Subsidiaries). "CONSOLIDATED NET INCOME" for any period shall mean the gross revenues of the Company and its Restricted Subsidiaries for such period less all expenses and other proper charges (including taxes on income), determined on a consolidated basis after eliminating earnings or losses attributable to outstanding Minority Interests, but excluding in any event: (a) any gains or losses (i) on the sale or other disposition of Investments or fixed or capital assets, and any taxes on such excluded gains and any tax deductions or credits on account of any such excluded losses or (ii) attributable to any non-recurring or extraordinary items including, without limitation, any discontinuance of operations; (b) the proceeds of any life insurance policy; (c) net earnings and losses of any Restricted Subsidiary accrued prior to the date it became a Restricted Subsidiary; PROVIDED, HOWEVER, that the net earnings and losses of American from and after December 16, 1997 and the net earnings and losses of the Issuer from and after November 19, 1997, shall be included in any determination of Consolidated Net Income hereunder; (d) net earnings and losses of any corporation (other than a Restricted Subsidiary) substantially all the assets of which have been acquired in any manner by the Company or any Restricted Subsidiary, realized by such corporation prior to the date of such acquisition; (e) net earnings and losses of any corporation (other than a Restricted Subsidiary) with which the Company or a Restricted Subsidiary shall have consolidated or which shall have merged into or with the Company or a Restricted Subsidiary prior to the date of such consolidation or merger; (f) net earnings of any business entity (other than a Restricted Subsidiary) in which the Company or any Restricted Subsidiary has an ownership interest unless such net earnings shall have actually been received by the Company or such Restricted Subsidiary in the form of cash distributions; 18 (g) any portion of the net earnings of any Restricted Subsidiary which for any reason is unavailable for payment of dividends to the Company or any other Restricted Subsidiary; (h) earnings resulting from any reappraisal, revaluation or write-up of assets; (i) any deferred or other credit representing any excess of the equity in any Subsidiary at the date of acquisition thereof over the amount invested in such Subsidiary; (j) any gain arising from the acquisition of any Securities of the Company or any Restricted Subsidiary; and (k) any reversal of any contingency reserve, except to the extent that provision for such contingency reserve shall have been made from income arising during such period. "CONSOLIDATED NET WORTH" shall mean, as of the date of any determination thereof, the consolidated total shareholders' equity of the Company and its Restricted Subsidiaries, determined in accordance with GAAP. "CONSOLIDATED TOTAL CAPITALIZATION" shall mean, as of the date of any determination thereof, the sum of (i) the aggregate principal amount of Consolidated Funded Debt then outstanding PLUS (ii) Consolidated Net Worth. "DEBT" of any Person shall mean, as of the date of any determination thereof (without duplication): (i) all indebtedness for borrowed money or evidenced by notes, bonds, debentures or similar evidences of indebtedness of such Person; (ii) obligations secured by any Lien upon property owned by such Person or created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, notwithstanding the fact that the rights and remedies of the seller, lender or lessor under any such arrangement in the event of default are limited to repossession or sale of property including, without limitation, obligations secured by Liens arising from the sale or transfer of notes or accounts receivable, but, in all events, excluding trade payables and accrued expenses constituting Consolidated Current Liabilities; (iii) Capitalized Rentals; (iv) reimbursement obligations in respect of credit enhancement instruments including letters of credit (excluding, however, short-term letters of credit and surety bonds issued in commercial transactions in the ordinary course of business); and (v) (without duplication of any of the foregoing) Guaranties of obligations of others of the character referred to hereinabove in this definition. "DEFAULT" shall mean any event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both, constitute an Event of Default. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed to also refer to any successor sections. "ERISA AFFILIATE" shall mean any corporation, trade or business that is, along with the Company, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in section 414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA. "EVENT OF DEFAULT" shall have the meaning set forth in SECTION6.1. "FIXED CHARGES" for any period shall mean on a consolidated basis the sum of (i) all Rentals (other than Rentals on Capitalized Leases) payable during such period by the Company and its Restricted Subsidiaries, and (ii) all Interest Charges on all Debt (including the interest component of Rentals on Capitalized Leases) of the Company and its Restricted Subsidiaries. "FOREIGN PENSION PLAN" means any plan, fund (including, without limitation, any superannuation fund) or other similar program established or maintained outside the United States by the Company or any one or more 19 of the Subsidiaries primarily for the benefit of employees of the Company or such Subsidiaries residing outside the United States, which plan, fund or other similar program provides for retirement income for such employees or a deferral of income for such employees in contemplation of retirement and is not subject to ERISA or the Code. "FUNDED DEBT" of any Person shall mean all Debt of such Person having a final maturity of one or more than one year from the date of origin thereof (or which is renewable or extendible at the option of the obligor for a period or periods of one or more than one year from the date of origin), including all payments in respect thereof that are required to be made within one year from the date of any determination of Funded Debt; PROVIDED, HOWEVER, that any obligation permitted to be classified under GAAP as a current liability (other than the "current portion" of Funded Debt and other than Funded Debt then in default) shall not constitute Funded Debt. "GAAP" shall mean generally accepted accounting principles in Canada. "GENERAL PARTNER" shall mean Intertape Polymer Inc., a Canadian corporation and the general partner of the Issuer. "GUARANTIES" by any Person shall mean all obligations (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing, or in effect guaranteeing, any liabilities, dividend or other obligation of any other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including, without limitation, all obligations incurred through an agreement, contingent or otherwise, by such Person: (i) to purchase such liabilities or obligation or any property or assets constituting security therefor, (ii) to advance or supply funds (x) for the purchase or payment of such liabilities or obligation, or (y) to maintain working capital or other balance sheet condition or otherwise to advance or make available funds for the purchase or payment of such liabilities or obligation, (iii) to lease property or to purchase Securities or other property or services primarily for the purpose of assuring the owner of such liabilities or obligation of the ability of the primary obligor to make payment of the liabilities or obligation, or (iv) otherwise to assure the owner of the liabilities or obligation of the primary obligor against loss in respect thereof. For the purposes of all computations made under this Agreement, a Guaranty in respect of any indebtedness for borrowed money shall be deemed to be Debt equal to the principal amount of such indebtedness for borrowed money which has been guaranteed, and a Guaranty in respect of any other obligation or liability or any dividend shall be deemed to be Debt equal to the maximum aggregate amount of such obligation, liability or dividend. "GUARANTY AGREEMENT (COMPANY)" shall have the meaning set forth in SECTION1.4. "GUARANTY AGREEMENT (IPG (US))" shall have the meaning set forth in SECTION1.4. "IPG (US)" shall mean IPG (US) Inc., a Delaware corporation, and any Person who succeeds to all, or substantially all, of the assets of IPG (US) Inc. "INSTITUTIONAL HOLDER" shall mean any insurance company, bank, savings and loan association, trust company, investment company, charitable foundation, employee benefit plan (as defined in ERISA) or other institutional investor or financial institution. "INTEREST CHARGES" for any period shall mean all interest and all amortization of debt discount and expense on any particular liabilities for which such calculations are being made. Computations of Interest Charges on a pro forma basis for Debt having a variable interest rate shall be calculated at the rate in effect on the date of any determination. "INVESTMENTS" shall mean all investments, in cash or by delivery of property made, directly or indirectly in any Person, whether by acquisition of shares of capital stock, indebtedness or other obligations or Securities or by loan, advance, capital contribution or otherwise; provided, however, that "Investments" shall not mean or include routine investments in property to be used or consumed in the ordinary course of business or accounts receivable arising in the ordinary course of business. 20 "ISSUER" shall mean (i) IPG Holdings LP, a limited partnership formed under the laws of the State of Delaware, and any Person who succeeds to all, or substantially all, of the assets and business of IPG Holdings LP or (ii) in the event of an Exchange of Notes pursuant to SECTION5.18, the New Issuer thereunder. "LIEN" shall mean any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute or contract, and including but not limited to the security interest lien arising from a mortgage, encumbrance, pledge, Capitalized Lease, conditional sale or trust receipt or a lease in which such Person is lessor, consignor or bailor for security purposes. The term "Lien" shall include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances (including, with respect to stock, stockholder agreements, voting trust agreements, buy-back agreements and all similar arrangements) affecting property. For the purposes of this Agreement, the Company or a Restricted Subsidiary shall be deemed to be the owner of any property which it has acquired or holds subject to a conditional sale agreement, Capitalized Lease or other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes and such retention or vesting shall constitute a Lien. "LIKE ASSETS" shall mean, as of the date of any determination thereof, operating assets, used or to be used by the Company or any Restricted Subsidiary in the lines of business in which the Company or such Restricted Subsidiary is engaged as of the Closing Date or in businesses reasonably related thereto. "LONG-TERM LEASE" shall mean any lease of real or personal property (other than a Capitalized Lease) having an original term, including any period for which the lease may be renewed or extended at the option of the lessor, of more than three years. "MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, PROVIDED that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings: "CALLED PRINCIPAL" means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to SECTION2.2 or has become or is declared to be immediately due and payable pursuant to SECTION6.3, as the context requires. "DISCOUNTED VALUE" means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. "REINVESTMENT YIELD" means, with respect to the Called Principal of any Note, 0.50% over the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the third Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as "PX1" or other appropriate page of the Bloomberg Financial Markets Services Screen (or such other display as may replace Page PX1 on the Bloomberg Financial Markets Services Screen) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the third Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the average life closest to and greater than the Remaining Average Life and (2) the actively traded U.S. Treasury security with the average life closest to and less than the Remaining Average Life. 21 "REMAINING AVERAGE LIFE" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "REMAINING SCHEDULED PAYMENTS" means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, PROVIDED that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to SECTION2.2 or SECTION6.3. "SETTLEMENT DATE" means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to SECTION2.2 or has become or is declared to be immediately due and payable pursuant to SECTION6.3, as the context requires. "MATERIAL DEBT" shall mean any Debt which has or relates to, in the aggregate, an unpaid principal amount (or aggregate liability) of more than U.S. $7,500,000 or an equivalent amount of money in any other currency. "MINORITY INTERESTS" shall mean any shares of stock of any class of a Restricted Subsidiary (other than directors' qualifying shares as required by law) that are not owned by the Company and/or one or more of its Restricted Subsidiaries. Minority Interests shall be valued by valuing Minority Interests constituting preferred stock at the voluntary or involuntary liquidating value of such preferred stock, whichever is greater, and by valuing Minority Interests constituting common stock at the book value of capital and surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such common stock required by the foregoing method of valuing Minority Interests in preferred stock. "MULTIEMPLOYER PLAN" shall have the same meaning as in ERISA. "NAIC" means the National Association of Insurance Commissioners or any successor thereto. "NET INCOME AVAILABLE FOR FIXED CHARGES" for any period shall mean the sum of (i) Consolidated Net Income during such period plus (to the extent deducted in determining Consolidated Net Income), (ii) all provisions for any Federal, state or other income taxes made by the Company and its Restricted Subsidiaries during such period, (iii) Fixed Charges of the Company and its Restricted Subsidiaries during such period and (iv) all amortization expenses of intangible assets. "OVERDUE RATE" shall mean with respect to the (a) Series A Notes, 9.66% per annum and (b) the Series B Notes, 9.81% per annum. "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "PERSON" shall mean an individual, partnership, corporation, trust or unincorporated organization, and a government or agency or political subdivision thereof. "PLAN" means an "employee benefit plan" (as defined in section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability. "PRIORITY DEBT" shall mean and include (i) all Debt of the Company and all Debt of the Issuer, in each case secured by Liens other than those expressly permitted by SECTIONSECTION5.10(a) through (i), inclusive, and (ii) all Debt of other Restricted Subsidiaries EXCLUDING, HOWEVER any Debt of such other Restricted Subsidiaries owing to the Company or a Wholly-owned Restricted Subsidiary and any unsecured Debt of IPG (US) described in the proviso to SECTION5.9(a). 22 "PURCHASERS" shall have the meaning set forth in SECTION1.1. "QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14 issued by the United States Department of Labor. "QUALIFYING EU JURISDICTION" shall mean any country (other than Greece) which as of the Closing Date is a member of the European Union. "RENTALS" shall mean and include as of the date of any determination thereof all fixed payments (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) in excess of $50,000 annually payable by the Company or a Restricted Subsidiary, as lessee or sublessee under a lease of real or personal property, but shall be exclusive of any amounts required to be paid by the Company or a Restricted Subsidiary (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under any so-called "percentage leases" shall be computed solely on the basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross revenues. "REPORTABLE EVENT" shall have the same meaning as in ERISA. "RESPONSIBLE OFFICER" shall mean any Senior Financial Officer and any other officer of the Company or the Issuer, as the case may be, with responsibility for the administration of the relevant portion of this Agreement or the Guaranty Agreement (Company). "RESTRICTED GROUP" shall mean, as of the date of determination thereof, the Company and its Restricted Subsidiaries. "RESTRICTED INVESTMENTS" shall mean all Investments, other than: (a) Investments by the Company and its Restricted Subsidiaries in and to Restricted Subsidiaries, including, without limitation, Investments (i) directly out of the cash proceeds to the Company of the concurrent sale of shares of capital stock of the Company or (ii) pursuant to a direct share exchange offer by the Company, and including any Investment in a corporation which, after giving effect to such Investment, will become a Restricted Subsidiary; (b) Investments in commercial paper maturing in 270 days or less from the date of issuance which, at the time of acquisition by the Company or any Restricted Subsidiary, is accorded a rating of at least A-2 by Standard & Poor's Corporation ("S&P") or at least Prime-2 by Moody's Investors Service, Inc. ("MOODY'S"), or at least A-1 low by Canadian Bond Rating Service ("CBRS") or at least R-1 low by Dominion Bond Rating Service ("DBRS") in Canada; (c) Investments in (i) direct obligations of the United States of America or any agency or instrumentality of the United States of America, the payment or guarantee of which constitutes a full faith and credit obligation of the United States of America or (ii) direct obligations of Canada or any agency or instrumentality of Canada or any province thereof (which province shall then have outstanding long-term debt bearing a rating of at least A- by S&P, A3 by Moody's, A low by CBRS or A low by DBRS), the payment or guarantee of which constitutes a full faith and credit obligation of Canada or such province, as the case may be, in either case maturing in twelve months or less from the date of acquisition thereof; (d) Investments in certificates of deposit maturing within one year from the date of issuance thereof, issued by a bank or trust company organized under the laws of the United States, any state thereof or Canada or any province thereof, having capital, surplus and undivided profits aggregating at least U.S. $100,000,000 (or its equivalent in Canadian currency) and whose long-term certificates of deposit are, at the time of acquisition thereof by the Company or a Restricted Subsidiary, rated A- or better by S & P, A3 or better by Moody's, A low or better by CBRS or A low or better by DBRS, or Investments in Eurodollar Certificates of deposit maturing within one year after the acquisition thereof and issued by a bank in western Europe or England having capital, surplus and undivided profits of at least U.S. $1,000,000,000 (or its equivalent in such country's local currency); and 23 (e) loans or advances (including, without limitation, loans or advances to employees of the Company for the purchase by such employee of shares of stock of the Company by such employee) in the usual and ordinary course of business to officers, directors and employees for expenses (including moving expenses related to a transfer) incidental to carrying on the business of the Company or any Restricted Subsidiary PROVIDED that the aggregate amount of all such loans or advances shall at no time exceed U.S. $5,000,000. "RESTRICTED PAYMENTS" shall mean, for any period, (i) the declaration or payment, directly or indirectly, of any dividend either in cash or property, on any shares of capital stock of the Company or any Restricted Subsidiary; (ii) the purchase, redemption or retirement, directly or indirectly, of any shares of capital stock of any class or of any warrants, rights or options to purchase or acquire any shares of capital stock of the Company or any Restricted Subsidiary; and (iii) any payment or distribution, directly or indirectly, by the Company or a Restricted Subsidiary in respect of its capital stock; PROVIDED, HOWEVER, that "Restricted Payments" shall not include any such dividends, purchases, redemptions, retirements or other distribution by a Restricted Subsidiary to the Company or by a Restricted Subsidiary to a Wholly-owned Restricted Subsidiary PROVIDED, FURTHER, HOWEVER, that any such dividends, purchases, redemptions, retirements or other distributions by the Issuer shall be excluded from "Restricted Payments" made to the extent made to the Company or to a Wholly-owned Restricted Subsidiary which is either the general partner or a limited partner of the Issuer. "RESTRICTED SUBSIDIARY" shall mean and include the Issuer, Intertape Polymer Corp., Intertape Polymer Inc., American Tape Co., IPG (US), Anchor, any Subsidiary so described in Annex A to Exhibit B-2 hereto and any other Subsidiary (i) which is organized under the laws of the United States, Puerto Rico, Canada or any Qualifying EU Jurisdiction or any jurisdiction thereof; (ii) which conducts substantially all of its business and has substantially all of its assets within the United States, Puerto Rico, Canada or any Qualifying EU Jurisdiction; (iii) of which at least 50% (by number of votes) of the Voting Stock or other equity interest is beneficially owned by the Company or any Wholly-owned Restricted Subsidiary; and (iv) which has been designated by the Board of Directors of the Company as a Restricted Subsidiary in accordance with SECTION5.16. In addition to the foregoing, if and so long as (a) the Company and its Restricted Subsidiaries own and hold at least 20% of the equity interest in IFCO, a limited liability company ("IFCO"), (b) the Company has the right to direct and supervise the operations of IFCO and (c) IFCO does not have assets in excess of 5% of Consolidated Assets, IFCO, at the election of the Company, may be designated a Restricted Subsidiary as provided in SECTION5.16. "SECURITIES ACT" shall mean the United States Securities Act of 1933, as amended from time to time. "SECURITY" shall have the same meaning as in Section 2(1) of the Securities Act. "SENIOR FINANCIAL OFFICER" means the chief financial officer, principal accounting officer, treasurer or comptroller of the Company or of the Issuer, as the case may be. "SENIOR FUNDED DEBT" shall mean Consolidated Funded Debt, other than Subordinated Funded Debt. "SENIOR OFFICER" means the chief executive officer or the chief financial officer of the Company. "SERIES" is defined in SECTION1.1. "SERIES A NOTES" is defined in SECTION1.1. "SERIES B NOTES" is defined in SECTION1.1. "SPECIAL RESTRICTED SUBSIDIARY" shall mean a Restricted Subsidiary of which at least 80% (by number of votes) of the Voting Stock or other equity interest is beneficially owned by the Company or any Wholly-Owned Restricted Subsidiary. "SUBORDINATED FUNDED DEBT" shall mean all unsecured Funded Debt of the Company or of the Issuer which, in each case, is subject to subordination provisions reasonably acceptable to the holders of not less than 66 2/3% in aggregate principal amount of the Notes, subordinating such Funded Debt to (i) in the case of Funded Debt of the Issuer, the obligations of the Issuer under the Notes and (ii) in the case of Funded Debt of the Company, the obligations of the Company under the Guaranty Agreement (Company), and (iii) in the case of Funded Debt of IPG (US), the obligations of IPG (US) under the Guaranty Agreement (IPG (US)). 24 "SUBSIDIARY" means, as to any Person, (i) any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, (ii) any partnership or joint venture if at least a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries, PROVIDED, that in the case of a 50% ownership interest, such Person shall have the right to exercise general direction and supervision over the operations of such partnership, joint venture or other entity. Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. "UNRESTRICTED SUBSIDIARY" shall mean any Subsidiary which is not a Restricted Subsidiary. "VOTING STOCK" shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled whether through the ownership of stock, partnership interests, by contract or otherwise, to elect a majority of the board of directors (or Persons performing similar functions). "WHOLLY-OWNED" when used in connection with any Subsidiary shall mean any Subsidiary of which all of the issued and outstanding equity interests (except directors' qualifying shares) and voting interests of which shall be owned by the Company and/or one or more of its other Wholly-owned Restricted Subsidiaries. 8.2. ACCOUNTING PRINCIPLES. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, the same shall be done in accordance with GAAP, to the extent applicable, except where such principles are inconsistent with the requirements of this Agreement. 8.3. DIRECTLY OR INDIRECTLY. Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether the action in question is taken directly or indirectly by such Person. SECTION 9 MISCELLANEOUS 9.1. REGISTERED NOTES. The Issuer shall cause to be kept at its principal office a register for the registration and transfer of the Notes (hereinafter called the "NOTE REGISTER") and the Issuer will register or transfer or cause to be registered or transferred as hereinafter provided any Note issued pursuant to this Agreement. At any time and from time to time the registered holder of any Note which has been duly registered as hereinabove provided may transfer such Note upon surrender thereof at the principal office of the Issuer duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or its attorney duly authorized in writing. The Person in whose name any registered Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes of this Agreement. Payment of or on account of the principal, premium, if any, and interest on any registered Note shall be made to or upon the written order of such registered holder. 9.2. EXCHANGE OF NOTES. At any time and from time to time, upon not less than ten days' notice to that effect given by the holder of any Note initially delivered or of any Note substituted therefor pursuant to SECTION9.1, this SECTION9.2 or SECTION9.3, and, upon surrender of such Note at its office, the Issuer will deliver in exchange therefor, without expense to such holder, except as set forth below, a Note of the same Series for the same aggregate principal amount as the then unpaid principal amount of the Note so surrendered, or Notes of the same Series aggregating such unpaid principal amount in the denomination of U.S. $500,000 (or such lesser amount as shall constitute 100% of the Notes of such holder) or any amount in excess thereof as such holder shall specify, dated as of the date to which interest has been paid on the Note so surrendered or, if such surrender is prior to the payment of any interest thereon, then dated as of the date of issue, registered in the name of such Person or Persons as may be designated by such holder, and otherwise of the same form, series and tenor as the Notes so surrendered for exchange. The Issuer may require the payment of a sum sufficient to cover any stamp tax or governmental charge imposed upon such exchange or transfer. 25 9.3. LOSS, THEFT, ETC. OF NOTES. Upon receipt of evidence satisfactory to the Issuer of the loss, theft, mutilation or destruction of any Note, and in the case of any such loss, theft or destruction upon delivery of a bond of indemnity in such form and amount as shall be reasonably satisfactory to the Issuer, or in the event of such mutilation upon surrender and cancellation of the Note, the Issuer will make and deliver without expense to the holder thereof, a new Note, of like tenor and series, in lieu of such lost, stolen, destroyed or mutilated Note. If the Purchasers, any subsequent Institutional Holder which is an insurance company or any other Institutional Holder which has a net worth in excess of U.S. $50,000,000 is the owner of any such lost, stolen or destroyed Note, then the affidavit of an authorized officer of such owner, setting forth the fact of loss, theft or destruction and of its ownership of such Note at the time of such loss, theft or destruction shall be accepted as satisfactory evidence thereof and no further indemnity shall be required as a condition to the execution and delivery of a new Note other than the written agreement of such owner to indemnify the Issuer. 9.4. EXPENSES, STAMP TAX INDEMNITY. Whether or not the transactions herein contemplated shall be consummated, the Obligors, jointly and severally, agree to pay directly all of your out-of-pocket expenses in connection with the preparation, execution and delivery of this Agreement and the transactions contemplated hereby, including but not limited to the reasonable charges and disbursements of Chapman and Cutler, your special counsel, duplicating and printing costs and charges for shipping the Notes, adequately insured to you at your home office or at such other place as you may designate, and all such reasonable expenses (including the fees and expenses of any investment banker or financial consultant) relating to any proposed or actual amendment, waivers or consents pursuant to the provisions hereof, including, without limitation, any amendments, waivers, or consents resulting from any work-out, renegotiation or restructuring relating to the performance by the Issuer of its obligations under this Agreement and the Notes or of the Company of its obligations under this Agreement, the Guaranty Agreement (Company) or the Guaranty Agreement (IPG (US)). The Obligors, jointly and severally, also agree that they will pay and save you harmless against any and all liability with respect to stamp and other taxes, if any, which may be payable or which may be determined to be payable in connection with the execution and delivery of this Agreement, the Notes, the Guaranty Agreement (Company) and the Guaranty Agreement (IPG (US)), whether or not any Notes are then outstanding. The Obligors, jointly and severally, agree to protect and indemnify you against any liability for any and all brokerage fees and commissions payable or claimed to be payable to any Person in connection with the transactions contemplated by this Agreement (other than those expressly retained by you). 9.5. POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE. No delay or failure on the part of the holder of any Note in the exercise of any power or right shall operate as a waiver thereof; nor shall any single or partial exercise of the same preclude any other or further exercise thereof, or the exercise of any other power or right, and the rights and remedies of the holder of any Note are cumulative to, and are not exclusive of, any rights or remedies any such holder would otherwise have. 9.6. NOTICES. All communications provided for hereunder shall be in writing and, if to you, delivered or mailed prepaid by registered or certified mail or overnight air courier, or by facsimile communication followed (on the date of transmission) by overnight air courier, in each case addressed to you at your address appearing on Schedule I to this Agreement or such other address as you or the subsequent holder of any Note initially issued to you may designate to the Company in writing, and if to the Company, delivered or mailed by registered or certified mail or overnight air courier, or by facsimile communication followed (on the date of transmission) by overnight air courier, to the Company or to the Issuer at 110E Montee de Liesse, St. Laurent, Quebec, Canada H4T 1N4, Attention: Vice President, Finance, Fax No. 514-731-5477, with a copy to Stikeman Elliott, 1155 Rene Levesque West Blvd., Suite 3900, Montreal, Quebec, Canada H3B 3V2, Attention: Michael L. Richards, Esq., Fax No. 514-397-3222, and to Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178, Attn: Nancy Corbett, Esq., Fax No. 212-309-6273 or to such other address as the Company or the Issuer may in writing designate to you or to a subsequent holder of the Note initially issued to you, PROVIDED that the failure to provide copies of any such notices to the parties set forth above or to provide any other copies shall not invalidate any notice provided to the Company or the Issuer pursuant to the terms of this SECTION9.6; PROVIDED FURTHER, HOWEVER, that a notice to you by overnight air courier shall only be effective if delivered to you at a street address designated for such purpose in Schedule I, and a notice to you by facsimile communication shall only be effective if made by confirmed transmission to you at a telephone number designated for such purpose in 26 Schedule I and followed (on the day of transmission) by overnight air courier, or, in either case, as you or a subsequent holder of any Note initially issued to you may designate to the Obligors in writing. 9.7. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the Obligors and their respective successors and assigns and shall inure to your benefit and to the benefit of your successors and assigns, including each successive holder or holders of any Notes. 9.8. SURVIVAL OF COVENANTS AND REPRESENTATIONS. All covenants, representations and warranties made by the Obligors or the General Partner herein and in any certificates delivered pursuant hereto, whether or not in connection with the Closing Date, shall survive the closing and the delivery of this Agreement and the Notes. 9.9. SEVERABILITY. Should any part of this Agreement for any reason be declared invalid or unenforceable, such decision shall not affect the validity or enforceability of any remaining portion, which remaining portion shall remain in force and effect as if this Agreement had been executed with the invalid or unenforceable portion thereof eliminated and it is hereby declared the intention of the parties hereto that they would have executed the remaining portion of this Agreement without including therein any such part, parts or portion which may, for any reason, be hereafter declared invalid or unenforceable. 9.10. GOVERNING LAW. This Agreement and the Notes issued and sold hereunder shall be governed by and construed in accordance with New York law, excluding choice of law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. 9.11. JURISDICTION AND SERVICE IN RESPECT OF ISSUER AND COMPANY. Any legal action or proceeding with respect to this Agreement, the Notes, the Guaranty Agreement (Company) or the Guaranty Agreement (IPG (US)) or any document related thereto may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, the Company and the Issuer hereby ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH OF THE ISSUER AND THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. EACH OF THE ISSUER, THE COMPANY AND EACH HOLDER OF A NOTE HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY. Each of the Issuer and the Company further consents that all service of process may be made by delivery to it at the address of the Issuer or the Company, as the case may be, set forth in SECTION9.6 hereof or to its Agent referred to below at such Agent's address set forth below and that service so made shall be deemed to be completed upon actual receipt. Each of the Issuer and the Company for itself hereby irrevocably appoints CT Corporation System with an office on the date hereof at 1633 Broadway, New York, New York 10019, as its Agent for the purpose of receiving service of any process within the State of New York. Nothing contained in this SECTION9.11 shall affect the right of any Noteholder to serve legal process in any other manner permitted by law or to bring any action or proceeding in the courts of any jurisdiction against the Issuer or the Company, or to enforce a judgment obtained in the courts of any other jurisdiction. 9.12. PAYMENTS FREE AND CLEAR OF TAXES. The Obligors, for the benefit of those holders of the Notes which are residents, citizens or domestic corporations of the United States of America at the time of any payment made by an Obligor hereunder (the "RELEVANT HOLDERS"), agrees that in the event any such payments made by an Obligor under the Notes, this Agreement the Guaranty Agreement (Company) or the Guaranty Agreement (IPG (US)) are subject to any present or future tax, duty, assessment, impost, levy or other similar charge (a "RELEVANT TAX") imposed levied, collected, assessed, deducted or withheld by the government of Canada (or any authority therein or thereof) or by the government of any other country or jurisdiction (or any authority therein or thereof) other than the United States (or any authority therein or thereunder) from or through which payments hereunder are actually made (each a "TAXING JURISDICTION"), the Obligors will pay to the Relevant Holder such additional amounts (the "ADDITIONAL AMOUNTS") as may be necessary in order that the net amounts paid to such Relevant Holder pursuant to the terms of this Agreement, such Notes, the Guaranty Agreement (Company) or the Guaranty Agreement (IPG (US)) after imposition of any such Relevant Tax (including, without limitation, any Relevant Tax on such Additional Amounts) shall be not less than the amounts specified 27 in this Agreement to be then due and payable (after giving effect to the exclusion for Relevant Taxes imposed by the government of the United States (or any authority therein or thereunder) as described above), except that no such Additional Amounts shall be payable in respect of this Agreement, any Note, the Guaranty Agreement (Company) or the Guaranty Agreement (IPG (US)) to a Relevant Holder which is liable for such Relevant Tax in respect of this Note Agreement, such Notes, the Guaranty Agreement (Company) or the Guaranty Agreement (IPG (US)) solely by reason of such recipient being resident or being deemed resident in such Taxing Jurisdiction or carrying on business or being deemed to carry on business in such Taxing Jurisdiction or having some other business connection with such Taxing Jurisdiction other than, in the case of Canada, the mere holding of this Agreement, such Notes the Guaranty Agreement (Company) or the Guaranty Agreement (IPG (US)) or the receipt of principal or interest in respect thereof. 9.13. CURRENCY OF PAYMENTS; JUDGMENTS. Any payment made by any Obligor to any holder of the Notes or for the account of any such holder in respect of any amount payable by such Obligor (including any payments under the Guaranty Agreement (Company)) or the Guaranty Agreement (IPG (US)) shall be made in U.S. Dollars. Any payment made by such Obligor to any Noteholder or for the account of any such Noteholder in respect of any amount payable by such Obligor in lawful currency of the United States of America, which payment is made in Canadian dollars or other foreign currency, whether pursuant to any judgment or order of any court or tribunal or otherwise, shall constitute a discharge of the obligations of such Obligor only to the extent of the amount of lawful currency of the United States of America which may be purchased with such Canadian dollars or other foreign currency on the date of payment (or if it is not practicable to make the purchase on such date, on the first day on which it is practicable to do so); PROVIDED that any such conversion of a foreign currency into lawful currency of the United States shall be calculated as of the date such payment is received by such Noteholder. If the amount of U.S. Dollars so purchased is less than the amount of U.S. Dollars expressed to be due hereunder or under the Notes, the Obligors shall indemnify such holder against any loss sustained by such holder as a result, and hereunder or under the Notes; and in any event, the Obligors shall indemnify such holder against the reasonable cost of making any such purchase. These indemnities shall constitute a separate and independent obligation from the other obligations herein, in the Notes in the Guaranty Agreement (Company) and in the Guaranty Agreement (IPG (US)), shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by any such holder, shall continue in full force and effect despite any judgment, order, claim or proof for a liquidated amount in respect of any such sum due hereunder, under any Note under the Guaranty Agreement (Company) and under the Guaranty Agreement (IPG (US)) or any judgment or order and shall survive the payment of the Notes and the termination of this Agreement. 9.14. CAPTIONS. The descriptive headings of the various Sections or parts of this Agreement are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. 9.15. INTEREST ACT (CANADA). Solely for purposes of the INTEREST ACT (Canada) and in respect of all or any portion of a calendar year, the annual rate of interest to which any interest rate herein is equal is such rate multiplied by a fraction, the numerator of which is the total number of days in such year and the denominator of which is 360. 9.16. LANGUAGE. The parties hereby confirm their express intent that this Agreement, the other Agreements, the Guaranty Agreement (Company), the Guaranty Agreement (IPG (US)), the Notes and all documents and agreements directly and indirectly related thereto be written in English. Les parties reconnaissent leur volonte expresse que la presente convention, les billets ainsi que les documents et convention qui s'y rattachent directement ou indirectement soient rediges en anglais. 28 The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. Accepted as of ____________, 1999 IPG HOLDINGS LP By: Intertape Polymer Inc., Its General Partner By: /s/ ANDREW M. ARCHIBALD -------------------------------------------- ITS VICE-PRESIDENT AND SECRETARY-TREASURER INTERTAPE POLYMER INC. By: /s/ ANDREW M. ARCHIBALD -------------------------------------------- ITS VICE-PRESIDENT AND SECRETARY-TREASURER INTERTAPE POLYMER GROUP INC. By: /s/ ANDREW M. ARCHIBALD -------------------------------------------- ITS CHIEF FINANCIAL OFFICER & VICE PRESIDENT AND ADMINISTRATION
29 Accepted as of ____________: PRINCIPAL LIFE INSURANCE COMPANY, on behalf of one or more separate accounts By: Principal Capital Management, LLC, a Delaware limited liability company, its authorized signatory By: /s/ JON C. HEINY, COUNSEL -------------------------------------------- Name: Jon C. Heiny COUNSEL By: /s/ JOELLEN J. WATTS -------------------------------------------- Joellen J. Watts COUNSEL
30 Accepted as of ____________: PRINCIPAL LIFE INSURANCE COMPANY By: Principal Capital Management, LLC, a Delaware limited liability company, its authorized signatory By: /s/ JON C. HEINY -------------------------------------------- Name: Jon C. Heiny COUNSEL By: /s/ JOELLEN J. WATTS -------------------------------------------- Joellen J. Watts COUNSEL
31 Accepted as of ____________: CONNECTICUT GENERAL LIFE INSURANCE COMPANY By: CIGNA Investments, Inc.(authorized agent) By: /s/ JAMES R. KUZEMCHAK -------------------------------------------- James R. Kuzemchak MANAGING DIRECTOR
32 Accepted as of ____________: JEFFERSON-PILOT LIFE INSURANCE COMPANY By: /s/ ROBERT E. WHALEN, II -------------------------------------------- Robert E. Whalen, II VICE PRESIDENT
33 Accepted as of ____________: C.M. LIFE INSURANCE COMPANY By: /s/ KATHLEEN LYNCH -------------------------------------------- Kathleen Lynch Title:
34 Accepted as of ____________: MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: /s/ KATHLEEN LYNCH -------------------------------------------- Kathleen Lynch MANAGING DIRECTOR
35 Accepted as of ____________: MONY LIFE INSURANCE COMPANY By: /s/ SUZANNE E. WALTON -------------------------------------------- Suzanne E. Walton MANAGING DIRECTOR
36 Accepted as of ____________: MONY LIFE INSURANCE COMPANY OF AMERICA By: /s/ SUZANNE E. WALTON -------------------------------------------- Suzanne E. Walton AUTHORIZED AGENT
37 Accepted as of ____________: MONY LIFE INSURANCE COMPANY (for the account of a Separate Account) By: /s/ SUZANNE E. WALTON -------------------------------------------- Suzanne E. Walton MANAGING DIRECTOR
38 Accepted as of ____________: NEW YORK LIFE INSURANCE COMPANY By: /s/ S. THOMAS KNOFF -------------------------------------------- S. Thomas Knoff DIRECTOR
39 Accepted as of ____________: THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By: /s/ RICHARD A. STRAIT -------------------------------------------- Richard A. Strait AUTHORIZED REPRESENTATIVE
40 RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK By: /s/ JAMES V. WITTICH -------------------------------------------- James V. Wittich VICE PRESIDENT, INVESTMENTS
41 SECURITY CONNECTICUT LIFE INSURANCE COMPANY By: /s/ JAMES V. WITTICH -------------------------------------------- James V. Wittich ASSISTANT TREASURER
42 RELIASTAR LIFE INSURANCE COMPANY By: /s/ JAMES V. WITTICH -------------------------------------------- James V. Wittich AUTHORIZED REPRESENTATIVE
43 NORTHERN LIFE INSURANCE COMPANY By: /s/ JAMES V. WITTICH -------------------------------------------- James V. Wittich ASSISTANT TREASURER
44 EX-2.5 9 EXHIBIT 2.5 EXHIBIT 2.5 PRELIMINARY PROSPECTUS DATED MARCH 8, 1999 THIS SHORT FORM PROSPECTUS CONSTITUTES A PUBLIC OFFERING OF THESE SECURITIES ONLY IN THOSE JURISDICTIONS WHERE THEY MAY BE LAWFULLY OFFERED FOR SALE AND THEREIN ONLY BY PERSONS PERMITTED TO SELL SUCH SECURITIES. NO SECURITIES COMMISSION OR SIMILAR AUTHORITY IN CANADA HAS IN ANY WAY PASSED UPON THE MERITS OF THE SECURITIES OFFERED HEREUNDER AND ANY REPRESENTATION TO THE CONTRARY IS AN OFFENCE. INFORMATION HAS BEEN INCORPORATED BY REFERENCE IN THIS SHORT FORM PROSPECTUS FROM DOCUMENTS FILED WITH SECURITIES COMMISSIONS OR SIMILAR AUTHORITIES IN CANADA. FOR THE PURPOSES OF THE PROVINCE OF QUEBEC, THIS SIMPLIFIED PROSPECTUS CONTAINS INFORMATION TO BE COMPLETED BY CONSULTING THE PERMANENT INFORMATION RECORD. COPIES OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE AND OF THE PERMANENT INFORMATION RECORD MAY BE OBTAINED ON REQUEST WITHOUT CHARGE FROM THE SECRETARY OF INTERTAPE POLYMER GROUP INC., AT 110E MONTEE DE LIESSE, ST-LAURENT, QUEBEC, H4T 1N4, TELEPHONE: (514) 731-7591. THE SECURITIES OFFERED HEREUNDER HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED. ACCORDINGLY, ABSENT REGISTRATION OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT, THE SECURITIES OFFERED HEREBY MAY NOT BE OFFERED, OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OF AMERICA OR TO OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS WITHIN THE UNITED STATES OF AMERICA, ITS TERRITORIES OR POSSESSIONS AND THIS SHORT FORM PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY WITHIN THE UNITED STATES. SEE "PLAN OF DISTRIBUTION". NEW ISSUE March 8, 1999 GRAPHIC TO GO HERE INTERTAPE POLYMER GROUP INC. $120,750,000 3,000,000 COMMON SHARES This offering (the "Offering") consists of an offering to the public of 3,000,000 common shares (the "Common Shares") of Intertape Polymer Group Inc. ("Intertape"). The offering price of the Common Shares was determined by negotiation among Intertape and the Underwriters. The common shares of Intertape are listed and posted for trading on The Toronto Stock Exchange (the "TSE") and on the American Stock Exchange (the "AMEX"). On February 23, 1999, the last trading day before the announcement of the Offering, the closing prices of the common shares of Intertape on the TSE and on the AMEX were $40.00 and US$26.50, respectively. The TSE has conditionally agreed to list the Common Shares distributed hereby, subject to compliance with the requirements of the TSE on or before May 26, 1999. PRICE: $40.25 PER COMMON SHARE --------------------------------- ---------------------------------
PRICE TO THE UNDERWRITERS' NET PROCEEDS TO PUBLIC FEE INTERTAPE(1) ------------ ------------- --------------- Per Common Share.......................................... $40.25 $1.61 $38.64 Total..................................................... $120,750,000 $4,830,000 $115,920,000
(1) Before deducting the expenses of the Offering estimated at $250,000, which will be paid out of the general corporate funds of Intertape. The Underwriters, as principals, conditionally offer to the public the Common Shares, subject to prior sale, if, as and when issued and sold by Intertape and delivered to and accepted by the Underwriters in accordance with the conditions contained in the Underwriting Agreement referred to under "Plan of Distribution" and subject to the approval of certain legal matters on behalf of Intertape by Stikeman, Elliott and on behalf of the Underwriters by McCarthy Tetrault. Subscriptions for the Common Shares will be received subject to rejection or allotment in whole or in part and the right is reserved to close the subscription books at any time without notice. It is expected that definitive certificates evidencing the Common Shares will be available for delivery at the closing of this Offering, which is expected to be on or about March 16, 1999, or on such other date as may be agreed upon, but not later than April 30, 1999. TD Securities Inc., one of the Underwriters, is a wholly-owned subsidiary of a Canadian chartered bank which is a lender to Intertape. See "Plan of Distribution". TABLE OF CONTENTS
PAGE -------- DOCUMENTS INCORPORATED BY REFERENCE..... 2 THE CORPORATION......................... 3 RECENT DEVELOPMENTS..................... 3 USE OF PROCEEDS......................... 4 CAPITALISATION.......................... 4 DESCRIPTION OF SHARE CAPITAL............ 5 DETAILS OF THE OFFERING................. 5 PLAN OF DISTRIBUTION.................... 5
PAGE -------- LEGAL MATTERS........................... 6 ELIGIBILITY FOR INVESTMENT.............. 6 AUDITORS, TRANSFER AGENT AND REGISTRAR............................. 6 PURCHASERS' STATUTORY RIGHTS............ 7 CERTIFICATE OF THE CORPORATION.......... C-1 CERTIFICATE OF THE UNDERWRITERS......... C-2
DOCUMENTS INCORPORATED BY REFERENCE THE FOLLOWING DOCUMENTS, FILED WITH THE VARIOUS SECURITIES COMMISSIONS OR SIMILAR REGULATORY AUTHORITIES IN EACH OF THE PROVINCES OF CANADA, ARE SPECIFICALLY INCORPORATED BY REFERENCE IN AND FORM AN INTEGRAL PART OF THIS SHORT FORM PROSPECTUS: (a) THE ANNUAL REPORT OF INTERTAPE ON FORM 20-F FOR THE YEAR ENDED DECEMBER 31, 1997, FILED IN LIEU OF AN ANNUAL INFORMATION FORM; (b) THE AUDITED CONSOLIDATED BALANCE SHEETS OF INTERTAPE AS AT DECEMBER 31, 1997 AND 1996 AND THE AUDITED CONSOLIDATED STATEMENTS OF EARNINGS, RETAINED EARNINGS AND CHANGES IN CASH RESOURCES FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 TOGETHER WITH THE AUDITORS' REPORT THEREON INCLUDED IN THE ANNUAL REPORT OF INTERTAPE FOR THE YEAR ENDED DECEMBER 31, 1997; (c) THE MANAGEMENT'S DISCUSSION AND ANALYSIS INCLUDED IN THE ANNUAL REPORT OF INTERTAPE FOR THE YEAR ENDED DECEMBER 31, 1997; (d) THE MANAGEMENT PROXY CIRCULAR OF INTERTAPE DISTRIBUTED IN CONNECTION WITH THE ANNUAL AND SPECIAL MEETING OF THE SHAREHOLDERS OF INTERTAPE HELD ON MAY 21, 1998; (e) THE COMPARATIVE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF INTERTAPE FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1998 AND 1997; (f) THE COMPARATIVE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF INTERTAPE FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1998 AND 1997; AND (g) THE COMPARATIVE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF INTERTAPE FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997. ANY DOCUMENTS OF THE TYPE REFERRED TO ABOVE AND ANY MATERIAL CHANGE REPORTS (EXCLUDING CONFIDENTIAL MATERIAL CHANGE REPORTS) FILED BY INTERTAPE WITH A SECURITIES COMMISSION OR ANY SIMILAR AUTHORITY IN CANADA, AFTER THE DATE OF THIS SHORT FORM PROSPECTUS AND PRIOR TO THE TERMINATION OF THE OFFERING, SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE INTO THIS SHORT FORM PROSPECTUS. ANY STATEMENT CONTAINED IN A DOCUMENT INCORPORATED OR DEEMED TO BE INCORPORATED BY REFERENCE HEREIN SHALL BE DEEMED TO BE MODIFIED OR SUPERSEDED, FOR THE PURPOSES OF THIS SHORT FORM PROSPECTUS, TO THE EXTENT THAT A STATEMENT CONTAINED HEREIN OR IN ANY OTHER SUBSEQUENTLY FILED DOCUMENT THAT ALSO IS OR IS DEEMED TO BE INCORPORATED BY REFERENCE HEREIN MODIFIES OR REPLACES THAT STATEMENT. THE MODIFYING OR SUPERSEDING STATEMENT NEED NOT STATE THAT IT HAS MODIFIED OR SUPERSEDED A PRIOR STATEMENT OR INCLUDE ANY OTHER INFORMATION SET FORTH IN THE DOCUMENT THAT IT MODIFIES OR SUPERSEDES. THE MAKING OF A MODIFYING OR SUPERSEDING STATEMENT SHALL NOT BE DEEMED AN ADMISSION FOR ANY PURPOSES THAT THE MODIFIED OR SUPERSEDED STATEMENT, WHEN MADE, CONSTITUTED A MISREPRESENTATION, AN UNTRUE STATEMENT OF A MATERIAL FACT OR AN OMISSION TO STATE A MATERIAL FACT THAT IS REQUIRED TO BE STATED OR THAT IS NECESSARY TO MAKE A STATEMENT NOT MISLEADING IN LIGHT OF THE CIRCUMSTANCES IN WHICH IT WAS MADE. ANY STATEMENT SO MODIFIED OR SUPERSEDED SHALL NOT BE DEEMED IN ITS UNMODIFIED OR SUPERSEDED FORM TO CONSTITUTE PART OF THIS SHORT FORM PROSPECTUS. 2 THE CORPORATION Intertape develops, manufactures and sells a variety of specialised polyolefin plastic packaging products for industrial use. These products include pressure-sensitive and water-activated carton sealing tapes, masking and reinforced filament pressure-sensitive tapes, duct tapes, acrylic coating, shrink wrap, stretched wrap and woven products. Most of Intertape's products are derived from resins that are converted into films and adhesives. Resins are also combined with paper and converted into a variety of packaging products. Vertical integration, whereby Intertape performs each step in the conversion of polyolefin resins and paper into its various products, and continuous capital expenditures to increase manufacturing efficiencies allow Intertape to be a low-cost producer of each product it manufactures. This vertical integration combined with the use of high-speed production equipment provides competitive advantages to Intertape and flexibility and control of the manufacturing process and in speed of delivery. Intertape's overall objective is to gain market share in large niche markets that it believes are growing at rates faster than the economy as a whole. Intertape's strategies for achieving this objective are as follows: (i) solidify its position as a low-cost manufacturer; (ii) increase its manufacturing capacity; (iii) develop new products; (iv) develop central distribution centres; (v) evaluate future complementary acquisitions; and (vi) expand its sales into new geographic markets. Intertape's registered office is located at 1155 Rene-Levesque Boulevard West, Suite 4000, Montreal, Quebec, H3B 3V2 and its principal executive offices are located at 110E Montee de Liesse, St-Laurent, Quebec, Canada, H4T 1N4. RECENT DEVELOPMENTS In March 1998, Intertape announced its plans to restructure its Flexible Intermediate Bulk Container ("FIBC") operations. Over the past several years, the increasing levels of imported products into North America have resulted in a continuing downward trend in the selling prices of FIBC products. This penetration into the North American marketplace, coupled with higher domestic manufacturing costs and worldwide currency devaluation have led to Intertape's decision to restructure its FIBC operations. Intertape remains strongly committed to the FIBC business and its customers and believes that the reorganisation of its FIBC operations will allow it to improve its competitiveness by restructuring its domestic cost base and gradually transfer the majority of its FIBC manufacturing facilities outside Canada and the United States. In May 1998, Intertape entered into a US$50 million unsecured revolving line of credit with an American banking corporation to refinance an existing facility of US$33 million. As of February 23, 1999, approximately US$40.8 million was outstanding under this facility. In June 1998, Intertape completed a private placement of US$137 million of senior guaranteed notes maturing in 2008 and bearing interest at the rate of 6.82% per annum. The proceeds from this private placement were used to repay debt incurred in December 1997 in connection with the acquisition of American Tape Co. and to repay short-term credit facilities. In September 1998, Intertape completed the previously-announced acquisition from Anchor Continental Holdings Inc., a wholly-owned subsidiary of Coating Technologies International, Inc., of Anchor Continental, Inc., which manufactures pressure-sensitive tapes including both masking and duct tapes. The purchase price for this acquisition was approximately US$102.1 million in cash and was entirely paid at closing. The purchase price was substantially financed by Canadian and American banks which advanced US$100 million to Intertape. The acquisition of Anchor Continental, Inc. is expected to enable Intertape to expand its existing product lines, to increase its product supply to its industrial customer base and to broaden the distribution channels for its products. In October 1998, Intertape completed the previously-announced acquisition of substantially all of the assets of the Rexford Paper Company, a division of Inland Paperboard and Packaging, Inc. The purchase price for this acquisition was approximately US$9.2 million in cash and was entirely paid at closing. This acquisition will provide Intertape with complementary product lines of sensitive tapes and water-activated tape and is expected to expand Intertape's distribution channels. 3 USE OF PROCEEDS Of the estimated net proceeds of $115,670,000 to be received by Intertape from this Offering, approximately $51.7 million (approximately US$34.5 million) will be used to reimburse the three series of outstanding senior unsecured US dollar notes due June 1, 2001 and issued in 1996, approximately $61.2 million (approximately US$40.8 million) will be used to reimburse the outstanding balance of a senior unsecured US dollar bank loan under the US$50 million unsecured revolving line of credit and the balance for general corporate purposes. CAPITALISATION The following table sets forth the consolidated capitalisation of Intertape as of the dates indicated, before and after giving effect to the sale of the Common Shares under this Offering, assuming the application of the estimated net proceeds therefrom as set forth under "Use of Proceeds". This table should be read in conjunction with the consolidated financial statements and related notes thereto incorporated by reference herein.
SEPTEMBER 30, 1998 AFTER GIVING EFFECT AUTHORISED DECEMBER 31, 1997(1) SEPTEMBER 30, 1998(1) TO THIS OFFERING(1) ----------- --------------------- ---------------------- -------------------- (unaudited) (unaudited) (in thousand of dollars, except number of shares) Short-term debt Bank indebtedness............ $ 25,083 $218,344 $153,233 Current portion of long-term debt....................... 4,310 3,968 3,968 -------- -------- -------- Total short-term debt.......... 29,393 222,312 157,201 Long-term debt US dollar bank loan under revolving credit facilities................. 92,488 -- -- US dollar bank term loan..... 71,475 -- -- US$10,000 Series 1 Notes..... US$10,000 14,295 15,321 -- US$15,000 Series 2 Notes..... US$15,000 21,443 22,981 -- US$8,000 Series 3 Notes...... US$8,000 11,436 12,257 -- US$137,000 6.82% Notes....... US$137,000 -- 209,898 209,898 Interest free government loan....................... 475 400 400 Other bank term loans........ 3,614 5,865 5,865 Obligations under capital leases..................... 14,841 8,115 8,115 -------- -------- -------- Total long-term debt (excluding current portion)............. 230,067 274,837 224,278 Shareholders' equity Class A Preferred Shares..... unlimited -- -- -- Common Shares................ unlimited 157,430 158,816 276,416(2) (25,019,921 shares) (25,106,400 shares) (28,106,400 shares) Retained earnings. 89,632 118,239 (3) 116,814 Accumulated foreign currency translation adjustments.... 3,040 3,453 3,453(4) -------- -------- -------- Total shareholders' equity... 250,152 280,508 396,683 -------- -------- -------- Total consolidated capitalisation............... $509,562 $777,657 $778,162 ======== ======== ========
- ------------ (1) The December 31, 1997 exchange rate used to convert US dollar denominated loans and notes is US$1.00 = Cdn, $1.4295. The September 30, 1998 exchange rate used to convert US loans is US$1.00 = Cdn. $1.5321. (2) The amount after giving effect to this Offering is net of the after-tax cost of underwriting commissions and expenses of issue aggregating approximately $3,150,000. 4 (3) As at September 30, 1998 after giving effect to the after-tax cost of a make-whole obligation incurred in connection with the reimbursement of the three series of outstanding senior unsecured US dollar notes due June 1, 2001. (4) As at September 30, 1998. DESCRIPTION OF SHARE CAPITAL The authorised share capital of Intertape is comprised of an unlimited number of common shares without nominal or par value and an unlimited number of Class "A" preferred shares without nominal or par value, issuable in series. As of the close of business on February 25, 1999, 25,231,833 common shares and no preferred shares were issued and outstanding. DETAILS OF THE OFFERING This Offering consists of 3,000,000 Common Shares at a price of $40.25 per share. Each common share entitles the holder thereof to dividends if, as and when declared by the directors, to one vote at all meetings of holders of common shares and to participate, PRO RATA, with the holders of common shares, in any distribution of the assets of Intertape upon liquidation, dissolution or winding-up, subject to the prior rights of holders of shares ranking in priority to common shares. PLAN OF DISTRIBUTION Pursuant to an agreement (the "Underwriting Agreement") dated February 26, 1999 among CIBC Wood Gundy Securities Inc., RBC Dominion Securities Inc., ScotiaMcLeod Inc., TD Securities Inc. and Trilon Securities Corporation (collectively, the "Underwriters") and Intertape, Intertape has agreed to sell and the Underwriters have agreed to purchase on March 16, 1999 or on such other date as may be agreed upon, but in any event not later than April 30, 1999 (the "Closing Date"), subject to the terms and conditions contained therein, and the approval of certain legal matters, all but not less than all of the 3,000,000 Common Shares subject to this Offering for a total consideration of $120,750,000 payable to Intertape against delivery of such Common Shares. In consideration of their services under the Underwriting Agreement, Intertape has agreed to pay to the Underwriters a fee in the aggregate amount of $4,830,000 ($1.61 per Common Share). Pursuant to the Underwriting Agreement, the obligations of the Underwriters are several and not joint and may be terminated upon the occurrence of certain stated events. The Underwriters are, however, obligated to take up and pay for all the Common Shares if any of the Common Shares are purchased under the Underwriting Agreement. TD Securities Inc. is controlled by a Canadian chartered bank which is a lender to Intertape. Intertape has agreed in favour of the Underwriters that it will not issue, sell or offer, agree or become bound to issue or announce the issuance or sale, offering or agreement to issue or sell any securities of Intertape or any securities convertible into, exercisable for, or carrying the right to purchase securities of Intertape, other than for purposes of (i) issuing or exercising options under Intertape's Executive Stock Option Plan, (ii) issuing or exercising rights under Intertape's Shareholder Protection Rights Plan or (iii) the payment in full or in part of the purchase price of any business or assets related to Intertape's activities, for a period of 90 days from the date of the Closing Date, without the prior written consent of CIBC Wood Gundy Securities Inc. on behalf of the Underwriters. Pursuant to policy statements of the COMMISSION DES VALEURS MOBILIERES DU QUEBEC and the Ontario Securities Commission, the Underwriters may not, throughout the period of distribution, bid for or purchase common shares. The foregoing restriction is subject to exceptions, on the condition that the bid or purchase not be engaged in for the purpose of creating actual or apparent active trading in, or raising the price of, the common shares. Such exceptions include a bid or purchase permitted under the by-laws and rules of the TSE relating to market stabilisation and passive market-making activities and a bid or purchase made for and on behalf of a customer where the order was not solicited during the period of distribution. Subject to the foregoing, pursuant to this Offering, the Underwriters may over-allot common shares or effect transactions 5 intended to stabilise or maintain the market price of the common shares at a higher level than that which might otherwise prevail on the open market. Such transactions may be commenced or discontinued at any time during this Offering. The Common Shares have not been and will not be registered under the United States SECURITIES ACT OF 1933, as amended (the "U.S. Securities Act"), and, accordingly, may not be offered or sold within the United States, except in certain transactions exempt from the registration requirements of the U.S. Securities Act. Each Underwriter has agreed that, except in accordance with the terms of such exemptions, it will not offer, sell or deliver Common Shares within the U.S. or any territories or possessions thereof. In addition, until 40 days after the commencement of this Offering, an offer or sale of the Common Shares within the United States by any dealer (whether or not participating in this Offering) may violate the registration requirements of the U.S. Securities Act. LEGAL MATTERS Certain legal matters in respect of the Common Shares will be passed upon by Stikeman, Elliott on behalf of Intertape and by McCarthy Tetrault on behalf of the Underwriters. On February 25, 1999, the partners and associates of Stikeman, Elliott and McCarthy Tetrault beneficially owned, directly or indirectly, as a group less than 1% of the common shares. ELIGIBILITY FOR INVESTMENT In the opinion of Stikeman, Elliott, counsel to Intertape, and McCarthy Tetrault, counsel to the Underwriters, based on legislation in effect at the date hereof and subject to compliance with the prudent investment standards and general investment provisions and restrictions of the following statutes (and, where applicable, the regulations thereunder) and, in certain cases, subject to the satisfaction of additional requirements relating to investment policies and goals, without resorting to the so-called "basket" provisions, an investment in the Common Shares will not, at the date of issue, be precluded under the following statutes: INSURANCE COMPANIES ACT (Canada); PENSION BENEFITS STANDARDS ACT, 1985 (Canada); TRUST AND LOAN COMPANIES ACT (Canada); AN ACT RESPECTING INSURANCE (Quebec), for an insurer, as defined therein, incorporated under the laws of the Province of Quebec, other than a guarantee fund corporation; AN ACT RESPECTING TRUST COMPANIES AND SAVINGS COMPANIES (Quebec), for a trust company, as defined therein, which invests its own funds and funds received as deposits and a savings company (as defined therein) investing its funds; SUPPLEMENTAL PENSION PLANS ACT (Quebec) for an insured plan as defined therein; LOAN AND TRUST CORPORATIONS ACT (Ontario); PENSION BENEFITS ACT (Ontario); INSURANCE ACT (Alberta); EMPLOYMENT PENSION PLANS ACT (Alberta); LOAN AND TRUST CORPORATIONS ACT (Alberta); THE INSURANCE ACT (Manitoba); FINANCIAL INSTITUTIONS ACT (British Columbia); and PENSION BENEFITS STANDARDS ACT (British Columbia). In addition, in the opinion of such counsel, the Common Shares will on the Closing Date, be qualified investments under the INCOME TAX ACT (Canada) for trusts governed by a registered retirement savings plan, registered retirement income fund or a deferred profit sharing plan. AUDITORS, TRANSFER AGENT AND REGISTRAR The auditors of Intertape are Raymond Chabot Grant Thornton, a general partnership, Chartered Accountants, Montreal, Quebec. The registrar and transfer agent for the Common Shares are CIBC Mellon Trust Company at its principal offices in Montreal, Toronto, Winnipeg, Calgary and Vancouver and ChaseMellon Shareholder Services, L.L.C. at its principal offices in New York. 6 PURCHASERS' STATUTORY RIGHTS Securities legislation in several provinces of Canada provides purchasers with the right to withdraw from an agreement to purchase the securities within two business days after receipt of a prospectus and any amendment, as well as remedies for rescission or, in certain provinces, damages where a prospectus and any amendment contains a misrepresentation or is not delivered to the purchaser, provided that such remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of his province. The purchaser should refer to any applicable provisions of the securities legislation of his province for the particulars of these rights or consult with a legal adviser. 7 CERTIFICATE OF THE CORPORATION Dated: March 8, 1999 The foregoing, together with the documents incorporated herein by reference, constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities laws of each of the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland. For the purposes of the SECURITIES ACT (Quebec), this simplified prospectus, as supplemented by the permanent information record, contains no misrepresentation that is likely to affect the value or market price of the securities to be distributed hereunder. (Signed) MELBOURNE F. YULL (Signed) ANDREW M. ARCHIBALD, C.A. Chairman and Chief Executive Officer Vice-President and Chief Financial Officer On behalf of the Board of Directors (Signed) ERIC E. BAKER (Signed) L. ROBBIE SHAW Director Director
C-8 CERTIFICATE OF THE UNDERWRITERS Dated: March 8, 1999 To the best of our knowledge, information and belief, the foregoing, together with the documents incorporated herein by reference, constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities laws of each of the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland. For the purposes of the SECURITIES ACT (Quebec), to our knowledge, this simplified prospectus, as supplemented by the permanent information record, contains no misrepresentation that is likely to affect the value or market price of the securities to be distributed hereunder. CIBC WOOD GUNDY SECURITIES INC. By: (Signed) FRANCOIS GERVAIS RBC DOMINION SECURITIES INC. SCOTIAMCLEOD INC. TD SECURITIES INC. By: (Signed) MICHEL BOUCHARD By: (Signed) CLAUDE MICHAUD By: (Signed) GARY LITTLEJOHN
TRILON SECURITIES CORPORATION By: (Signed) TREVOR D. KERR The following includes the name of every person or company having an interest, either directly or indirectly, to the extent of not less than five percent, in the capital of: CIBC WOOD GUNDY SECURITIES INC.: a wholly-owned subsidiary of a Canadian chartered bank; RBC DOMINION SECURITIES INC.: RBC Dominion Securities Limited, a majority-owned subsidiary of a Canadian chartered bank; SCOTIAMCLEOD INC.: an indirect wholly-owned subsidiary of a Canadian chartered bank; TD SECURITIES INC.: a wholly-owned subsidiary of a Canadian chartered bank; and TRILON SECURITIES CORPORATION: a wholly-owned subsidiary of Trilon Financial Corporation. C-9 EX-3 10 EXHIBIT 3 EXHIBIT 3 AUDITORS' REPORT To the Shareholders of Intertape Polymer Group Inc. We have audited the consolidated balance sheets of Intertape Polymer Group Inc. as at December 31, 1999 and 1998 and the consolidated statements of earnings, retained earnings and cash flows for each of the years in the three-year period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in Canada. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 1999 and 1998 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1999 in accordance with generally accepted accounting principles in Canada. (Signed) RAYMOND CHABOT GRANT THORNTON Montreal, Canada General Partnership April 7, 2000 Chartered Accountants 10 EX-4 11 EXHIBIT 4 EXHIBIT 4 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation of our report dated April 7, 2000, on our audits of the consolidated financial statements of Intertape Polymer Group Inc. as at December 31, 1999 and 1998 and for each of the years in the three-year period ended December 31, 1999, which report is included in this Annual Report on Form 20-F. (Signed) RAYMOND CHABOT GRANT THORNTON Montreal, Canada General Partnership May 19, 2000 Chartered Accountants 11 -----END PRIVACY-ENHANCED MESSAGE-----